Disclosure - application for orders for the inspection and disclosure of documents
Before : |
J. A. Clyde-Smith O.B.E., Commissioner, and Jurats Ronge and Austin-Vautier |
Between |
IQ EQ 1986 Limited |
Representor |
And |
Agilitas 2013 Private Equity GP Limited |
First Respondent |
And |
Agilitas 2013 Co-Investment 1 GP Limited |
Second Respondent |
And |
Agilitas 2014 Co-Investment 1 GP Limited |
Third Respondent |
And |
Agilitas MH Gruppen 2015 Limited |
Fourth Respondent |
Advocate E. B. Drummond for the Representor.
Advocate M. W. Cook for the Respondents.
judgment
the COMMISSIONER:
1. The Representor ("the Limited Partner") applies under Article 26 of the Limited Partnerships (Jersey) Law 1994 ("the 1994 Law"), or alternatively under the customary law, for orders against the Respondents for the inspection and disclosure of documents.
2. The Limited Partner, in its capacity as trustee of the Nechema Trust, is a limited partner in four Jersey limited partnerships formed under the 1994 Law between 2013 and 2017 ("the Limited Partnerships"). The Respondents are the general partners of each of the Limited Partnerships, the terms of which are, for all practical purposes, the same.
3. As Mr Paul Rondel, a director of the Limited Partner, explains in his affidavit, the structure could be described as a "double-decker" in that each of the Limited Partnerships are themselves general partners of and investors in further underlying limited partnerships, which are established and operate as private investment funds ("the Underlying Funds"). The Underlying Funds have external third party investors as limited partners, and make private equity investments. This is apparently a typical model for private equity funds, by means of which the management team or entities established for their benefit can invest, indirectly, in the underlying private equity funds, aligning their interests with the external third party investors and participating in performance fees which are payable out of the profits of the underlying private equity funds upon certain investment hurdles being met.
4. Sanne Fiduciary Services Limited ("Sanne") acts as administrator to the Limited Partnerships including the provision of registered offices and some of the directors of the Respondents. The Court has not been provided with copies of the administration agreement between Sanne and the Respondents. It was not made a party to the Representation.
5. Mr Serge Touati, on whose behalf we understand the Nechema Trust was established, was part of the management team by virtue of being a member of Agilitas Private Equity LLP, a limited liability partnership registered in England, which acts as investment adviser to the Underlying Funds ("the UK LLP").
6. In or around September 2019, Mr Touati was given notice of compulsory retirement from the UK LLP, and subsequently placed on garden leave. This is the subject of dispute and separate proceedings in the UK.
7. Mr Touati's role in the UK LLP provided the Limited Partner with comfort given that he was integral to the management and dealings of the Limited Partnerships, but in the light of him being placed on garden leave, this was no longer the case, and Mr Rondel deposed that it became important for the Limited Partner, as a trustee, to fully investigate and inform itself as to the financial affairs and activities of the Limited Partnerships.
8. By letters dated 29th January 2020, Bedell Cristin gave formal notice to each of the Respondents that the Limited Partner wished to exercise its right to access "all records of the Limited Partnerships" by undertaking an initial inspection of the records of the Limited Partnerships whether in hard copy or electronic form on Friday 7th February 2020 at 9.30 a.m. taking copies if required.
9. In view of the practicalities, and without prejudice to the generality of its broader rights to information, the Respondents were invited, in the first instance, to supply the Limited Partner with copies in electronic form of the documents listed in an attached schedule within 21 days. If any portion of the information was readily available in a shorter time, then the Respondents were asked to provide that material as soon as they reasonably could. The Limited Partner undertook to pay the Respondents' reasonable copying costs. The letter set out in summary the legal basis for the Limited Partner's right to access under the 1994 Law, the customary law of Jersey and under the Limited Partnership Agreements.
10. To give some idea of the breadth of the Limited Partner's request for disclosure, we set out the schedule to that letter which constitutes the documents sought from the Respondents in the first instance only:
"1. The records required to be maintained by the Limited Partnership in accordance with Article 8(4) of the 1994 Law.
2. The register of limited partners in the Limited Partnership, their contributions and allocations, including any records of any changes thereto over time.
3. Minutes or other records held of all meetings of the General Partner (including board, committee or other meetings) to the extent that any such minutes or records relate, in whole or part, to the business of the Limited Partnership.
4. Minutes or other records held of all meetings of the partners of the Limited Partnership.
5. Correspondence entered into by the General Partner in its capacity as general partner of the Limited Partnership, including any communications with (i) limited partners or prospective limited partners, (ii) any relevant regulatory authorities or (iii) any contractual counterparty.
6. Contracts entered into by the General Partner in its capacity as general partner of the Limited Partnership.
7. Advice received by the General Partner from any adviser.
8. Documents provided to any limited partners since establishment of the Limited Partnership.
9. Reports and Financial Statements of the Limited Partnership (including consolidated accounts, where applicable).
10. Detailed trading profit and loss accounts.
11. Auditors' reports.
12. Details of fixed assets, including leasehold improvements, investments, debtors and creditors.
13. Internal accounting spreadsheets supporting or explaining accounting system entries.
14. Year-end files prepared for auditors, if any.
15. Auditors' representation letters, if any.
16. Other correspondence with auditors, and notes of meetings with auditors, if any.
17. Sales and purchase ledgers.
18. Cash books.
19. Sales invoices.
20. Purchase invoices.
21. Budgets, forecasts and cash flows.
22. Current activities: all relevant accounting information (including quarterly and monthly accounts.)
23. Tax returns submitted and any correspondence with tax authorities.
24. Any summaries or material documents relating to investments made by the Limited Partnerships, any documents relating to distributions received from such investments or any distributions to partners in the Limited Partnership.
25. Any documents/arrangements and/or calculations dealing with allocations and distributions of profits of the Limited Partnership (including, without limitation, the General Partner's Profit Share and Carried Interest).
26. Financial records, schedules of all fees charged, together with underlying calculations, fee invoices and payment details, schedules of all income/receipts, schedules of all costs incurred including recharges, together with underlying evidence of costs being incurred, purchase invoices or other proof of expense, evidence of payment, schedules of all cost recharges, together with any agreements/arrangements as to the basis for recharge, evidence of expense incurred and payment thereof.
27. Bank statements.
28. Schedules of all related party transactions together with any calculations as to the basis for the amount thereof.
29. Financial and accounting information disclosed to existing or potential investors including, in the context of pre-marketing and fundraising of various funds (Agilitas 2013 Private Equity L.P., Agilitas 2013 Co-investment 1 L.P.,. Agilitas 2014 Co-investment 1 L.P., Agilitas MH Gruppen 2015 L.P., Agilitas 2015 Private Equity L.P., Agilitas Exemplar 2016 L.P), PPMs, DOQs and information about economics of the various structures (carried interest and sharing, sharing of profits, remuneration of partners and employees, etc.)."
11. The letters noted that if the Respondents were unwilling to provide access to the records of the Limited Partnerships as required, the Limited Partner would make an application for an order for compliance, in accordance with Article 26 of the 1994 Law.
12. Mourant, acting for the Respondents, replied by letters dated 6th February 2020, acknowledging the Limited Partner's entitlement to records in relation to the Limited Partnerships. The Respondents had every intention of assisting and ensuring those rights were met in accordance with the applicable legal requirements, but did not accept that the Limited Partner's rights extended to sight of all documents created in the business of the Limited Partnerships, the request extending beyond the specific records listed in the 1994 Law. The Respondents needed to consider the confidentiality provisions contained within the Limited Partnership Agreements and asked for:
(i) the identity of the representative who would attend to carry out the inspection and to receive the documents;
(ii) confirmation as to any additional parties that the Limited Partner intended to share the documents obtained with;
(iii) confirmation as to the use to which the documents were to be put;
(iv) confirmation as to the rationale for the request for each of the documents in the light of the confidentiality requirements at Clause 17 of the Limited Partnership Agreements;
(v) confirmation that the terms of the Limited Partnership Agreements would be adhered to in full.
13. The letter went on to state that the provisions of Clause 17 clearly framed the agreement and expectations of the parties as regards the confidentiality attached to the partnership information and the Respondents recognised their duties to the wider partnership and each partner's expectation that care is taken to achieve adherence to Clause 17. It would not be possible for the requested inspection to take place on 7th February, 2020, as further time was required for the request to be properly considered upon receipt of and in light of the information requested. The letter repeated the assurance that the Respondents would take action to ensure the relevant legal obligations were met and would seek to do so expeditiously. Any application to the Court would be premature and an unnecessary incursion of costs and court time at that stage.
14. By its letter of 11th February 2020, Bedell Cristin answered the questions raised by Mourant and reiterated the right of the Limited Partner to inspect and have copies of all records of the Limited Partnerships, a right held in leading English authority, it was said, to be an absolute right irrespective of the purpose for which the inspection is undertaken. It was not open to the Respondents to refuse access to all information on the basis of concerns as to the scope of information requested or the uses to which documents obtained may be put. Whilst the 1994 Law provided for more stringent penalties in respect of any failure to comply with the obligation to provide copies of certain records (a reference to Article 8) that did not restrict or limit the trustee's right to all records. Access for inspection was then requested for Wednesday 12th February 2020.
15. Mourant responded the same day, stating that the Respondents would provide the disclosure required under Article 8 of the 1994 Law, which they did the same day. In respect of the balance of the documents, in the light of the litigation in England commenced by Mr Touati, the Respondents needed to ensure that the risk associated with disclosure of confidential information to parties or advisers who are not limited partners would be addressed and because the Limited Partner's request to inspect extended to all documents created in the business of the Limited Partnerships, an assessment exercise would need to take place, which would take some time to complete. It would not be possible, therefore, for the requested inspection of the balance of the documents to take place the next day.
16. By its letter of 17th February 2020, Bedell Cristin suggested that the Respondents consider the schedule attached to its letter of 29th January 2020 and confirm which of the items listed the Respondents accepted that the Limited Partner was entitled to see and where they considered the Limited Partner was not entitled, to confirm the specific basis upon which it was not entitled. Disclosure of those items to which they accepted the Limited Partner was entitled should be made by close of business on Monday 2nd March 2020 at the latest. The Respondents were asked to start collating documentation, if it had not already been collated, so that it could be provided without delay.
17. Mourant responded on 25th February 2020 that rather than debating the scope of the Limited Partner's entitlement category by category, the Respondents proposed to provide a sub-set of the Limited Partnerships' document universe that they considered would provide the Limited Partner with the information it was seeking and thereby avoid incurring time and cost interrogating the Limited Partnerships' records for duplicate information. It was anticipated that these documents would answer a number of the Limited Partner's queries, but they did not seek to preclude the possibility of constructive dialogue about further disclosure if they did not. They proposed to provide the Limited Partner with the unaudited accounts up to the year ended 31st March 2019, the latest year end trial balance and copies of bank statements for each partnership, but before releasing those records, they required written undertakings that:
(i) any documents or information provided would not be shared or employed in any manner that would have the ultimate or indirect effect of destroying the confidentiality of those documents or that information;
(ii) no document or information provided would be disclosed to any party not permitted by the Limited Partnership Agreement pursuant to Clause 17, and
(iii) no documents or information provided would be used to the detriment of the Limited Partnerships or any of them or any of the partners, fund partnerships or investors.
18. Bedell Cristin replied on 13th March 2020 summarising again the legal principles involved, but on this occasion by reference to the case of Inversiones Frieira SL, Inversiones Valea SL v Colyzeo Investors II LP, Colyzeo Investment Management Limited [2011] EWHC 1762 (Ch) (which was attached to the letter) and stating that the narrow expansion of information offered on the basis of these written undertakings was wholly unacceptable and without justification. Further correspondence was pointless and the Limited Partner had no option other than to issue court proceedings.
19. The representation was brought before the Court on 20th March 2020, when the Respondents were convened to the hearing that took place on 5th June 2020. It seeks the following relief:
"(2) THAT at the substantive hearing of this Representation on 5 June 2020, each of the General Partners be ordered to:-
(a) disclose a copy of the documentation set out in the Schedule to this Representation as it relates to each of their respective Limited Partnerships, to the Limited Partner within 7 days of the date of this order;
(b) permit the Limited Partner to inspect and make copies of the records of their respective Limited Partnerships in accordance with article 13(1)(a) of the 1994 Law, within 7 days following receipt of a request for inspection from the Limited Partner; and
(c) provide the Limited Partner with true and full information and a formal account in relation to their respective Limited Partnerships in accordance with Article 13(1)(b) of the 1994 Law, within 2 clear business days of receipt of a request for information from the Limited Partner."
The schedule attached to the Representation had a shorter list of 24 categories compared with Bedell Cristin's letter of the 29th January 2020, to take account of the Article 8(4) disclosure which had by then been given and correspondence received from Mourant confirming that the accounts of the Limited Partnerships were not audited.
20. Further correspondence ensued, but by its letter of 26th May 2020, Mourant addressed each of the categories set out in Bedell Cristin's schedule with its proposals for disclosure in respect of each, no longer pressing its requirement for written confirmations. Bedell Cristin responded on 1st June, pointing out that the list contained in the schedule was an initial but not exhaustive list. It complained that some of the information offered was to be summary in nature, without disclosing the underlying materials and that no time-scale was provided for the delivery of the information. The fact of the matter was that nothing had been provided and if the Respondents were willing to be reasonable and to provide all information then they should provide a complete list by category of all the information that is held relating to the Limited Partnerships, including the role of the General Partner in the underlying funds and the information held by Sanne, as administrator.
21. Having seen Advocate Drummond's written submissions for the hearing, Mourant wrote again on 3rd June 2020, addressing the issues raised by Advocate Drummond, which had been set out again category by category. The disclosure now offered was said to go considerably beyond what the Limited Partner was in fact legally entitled to.
22. The 1994 Law represents a modification of the existing customary law relating to partnerships, or contrats de société, Article 40 providing:
"40 Saving
The rules of customary laws applicable to partnerships (contrats de société) shall apply to limited partnerships except in so far as they are inconsistent with the express provisions of this Law".
23. As the Jersey Law Commission said in its consultation paper on the Jersey Law of Partnership (consultation paper No. 2/2008/CP):
"... whilst in England the majority of the basic principles of partnership law had been set out clearly in statutory form for some considerable time, namely in the Partnership Act of 1890 as amended, no such clear statement of the Jersey law of partnership exists. There is no equivalent statute."
24. There are few Jersey cases on partnerships, but in the case of Bennett v Lincoln [2005] JLR 125, the issue was whether there was in law a partnership between the parties and Sir Philip Bailhache, then Bailiff, said this at paragraphs 15-19:
"15. Since that decision the legislature has however adopted the Limited Partnerships (Jersey) Law 1994 and the Limited Liability Partnerships (Jersey) Law 1997 [now 2017]. Both are of course particular legal animals, but some assistance as to the nature of the species can nonetheless be drawn from the statutes. Article 41 of the 1994 Law provides that - "the rules of customary law applicable to partnerships (contrats de société) shall apply to limited partnerships except in so far as they are inconsistent with the express provisions of this Law."
16. Similarly, art. 49 of the 1997 Law provides....These statutory provisions make it clear that the source of our law of partnerships is to be found in the customary law.
17. Counsel for the Defendant referred us to a number of authorities and to a useful article entitled Limited liability partnerships - true partnerships?, 2 Jersey law Review 1 (1998), Mr Walker being a Solicitor of the Royal Court. Counsel for the Plaintiff did not suggest that the law was not correctly stated by the Defendant.
18. Not much may turn, however, certainly for the purposes of this case, on the genesis of the law of partnership. Indeed decisions of the English Court, interpreting the common law and even the 1890 Act, may occasionally be helpful. When considering the nature of partnership in Holme v Hammond (1872) 7 Ex 218 at 234, Cleasby B described Pothier as 'a very accurate writer' and, referring to a translation of Pothier in an English textbook, stated 'that, in my opinion, explains the general nature of partnership'. The customary law principles laid down by Pothier have much in common with the English common law. Indeed, the definition of a partnership in section 1 of the Partnership Act 1890 is not dissimilar to Pothier's definition of a 'contrat de société'.
19. Pothier defines a 'contrat de société' as follows...:
'Le Contrat de Société est un contrat, par lequel deux ou plusieurs personnes mettent ou s'obligent de mettre en commun quelque chose, pour faire en commun un profit honnête, dont ils s'obligent réciproquement de se rendre compte'.
20. In our judgment a partnership in Jersey law is a contractual relationship by which two or more persons oblige themselves to carry on business or to hold something in common with a view to an honest profit which they commit to share amongst themselves."
25. In Cannon v Nicol [2006] JLR 299, the issue was whether or not a partnership had been created and Sir Michael Birt, then Deputy Bailiff, cited the constituent elements of a partnership as set out in Pothier and identified in Bennett v Lincoln with approval, but found that the Court was not bound to adopt Pothier when ascertaining the customary law of Jersey, in particular in relation to concepts that would not be appropriate for modern times.
26. As the Law Commission noted at paragraph 6.2, the present Law of Partnerships is essentially to be found in the works of Pothier and Domat save as altered by legislation. The Commission analysed the existing Law of Partnerships in some detail, but two principles can be extracted as being indisputable:
(i) A contract of partnership is one of good faith, requiring honesty and fair dealing as between the partners themselves (paragraph 9.2).
(ii) In the absence of agreement to the contrary, all partners are entitled to share in the management of the partnership business and to enter into obligations on behalf of the partnership - subject, of course, to the overriding requirement of good faith (paragraph 12.1).
27. That duty of good faith is applicable both under Jersey and English law. As it says in Lindley and Banks on Partnerships 20th edition at 16-06:
"The nature of the duty
It hardly needs to be stated that the duty of good faith is of general application and that the relationship between partners is of a fiduciary nature, as Vice-Chancellor Bacon made clear in Helmore v Smith:
'If fiduciary relation means anything I cannot conceive a stronger case of fiduciary relation than that which exists between partners. Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first instance; it is because they continue to trust each other that the business goes on.'
The duty will be particularly in point when a partner is managing the firm's business."
28. Upon these foundations, we turn to the relevant provisions of the 1994 Law, a key aspect of which is that a limited partner has no liability for the debts or obligations of the limited partnership unless he or she participates as a general partner in the management of the business (Article 19(1) and (2)). With no involvement in management, which is undertaken by the general partner, Article 13 secures for a limited partner the following rights:
"13 Rights of limited partner
(1) A limited partner has the same right as a general partner -
(a) during business hours, to inspect and make copies of or take extracts from the limited partnership records at all times;
(b) to be given, on demand, true and full information of all things affecting the limited partnership and to be given a formal account of partnership affairs whenever circumstances render it just and reasonable."
29. "Records" is not defined, but Article 8(4) requires that certain limited records be kept at the registered office of the limited partnership, available for inspection:
"(4) A limited partnership shall keep at its registered office
(a) A register showing in alphabetical order for each partner:-
(i) the full name and address of each limited partner who is an individual, or in the case of a body corporate its full name, the place where it is incorporated and its registered or principal office,
(ii) where the participation by limited partners is defined by percentage interests or by the number of units or other similar rights held by them, the percentage interest or the number and class of units or other rights held;
(b) a copy of the declaration of limited partnership and each amendment made to it;
(c) a copy of the partnership agreement and each amendment made to it;
(d) a statement of the amount of any contributions agreed to be made by limited partners and the time at which, or events on the happening of which, the contributions are to be made;
(e) a statement of the amount of money and nature and value of any other property or services contributed by each limited partner and the dates thereof;
(f) a statement of the amount of contributions returned to limited partners and the dates thereof;
(g) such other particulars as may be prescribed."
30. Article 8.5 goes on to provide that records kept under paragraph (4) shall be:
"(c) available for inspection and copying without charge during ordinary business hours at the request of a partner."
"Partner" is defined under Article 1 as meaning a limited partner or a general partner.
31. Under Article 8(6) if default is made in compliance with this requirement, each of the general partners is guilty of an offence and liable to a fine. It is these documents which to date the Respondents have produced.
32. Article 9 goes on to provide that accounting records must be kept:
"9 Accounts and audit
(a) A limited partnership shall keep accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time the financial position of the limited partnership."
33. If default is made in compliance with this article, each of the general partners is also guilty of an offence and liable to a fine.
34. "Accounting records" is not defined, but this requirement is wide-ranging in that under pain of criminal penalty sufficient records have to be kept by the general partners in order not only to show, but to explain transactions and to disclose the financial position of the limited partnership at any time and with reasonable accuracy.
35. Article 34 deals with the form in which records may be kept:
"34 Form of limited partnership's records
(1) The records which a limited partnership is required by this Law to keep may be kept in the form of a bound or loose-leaf book, or photographic film, or may be entered or recorded by a system of mechanical or electronic data processing or any other information storage device that is capable of reproducing any required information in intelligible written form within a reasonable time.
(2) A limited partnership shall take reasonable precautions -
(a) To prevent loss or destruction of;
(b) To prevent falsification of entries in; and
(c) To facilitate detection and correction of inaccuracies in,
the records required by this Law to be kept, and if default is made in compliance with this paragraph each of the general partners is guilty of an offence and liable to a fine not exceeding level 2 on the standard scale."
36. The "records required by this Law to keep" comprises those formal records specified in Article 8(4) and the much wider accounting records specified in Article 9. The importance of keeping these records is stressed by the fact that any failure of the limited partnership to take the reasonable precautions set out above renders the general partners guilty of a criminal offence.
37. Counsel place a different interpretation upon the breadth of the right to a limited partner to inspect the limited partnership records under Article 13(1)(a). Advocate Cook argued that the right to inspect was limited to the formal documents required to be kept at the registered office of the limited partnership under Article 8(4). He noted that the 1994 Law had been amended in 2009, altering the reference in Article 13(1)(a) from "books and records" to just "records", accordingly bringing it in line, he said, with Article 8(5). If Article 13(1)(a) was intended to be a complete right of access to all documents, then he said Article 13(1)(b) was arguably redundant, as there would be nothing further to seek information on or an account. Article 13(1)(b) in his view related to documents that did not fall within the Article 8(4) disclosure pool, and the right to those documents was subject to the important caveat that the information or formal account of partnership affairs was to be given "wherever the circumstances render it just and reasonable". Accordingly, he argued that the test for the provision of any documents beyond those in Article 8(4) is that it must be "just and reasonable" for them to be provided. He made no reference to Article 9.
38. We agree with Advocate Drummond that this narrow interpretation is not correct as a matter of straightforward statutory interpretation:
(i) If the right to inspect and make copies of the limited partnership records under Article 13(1)(a) was to be limited to the formal documents listed in Article 8(4), then it would have so provided. It did so, for example, in Article 18, where it expressly referred to "the records kept under Article 8(4)" and in Article 34(1), where it referred to records which a limited partnership "is required by this Law to keep".
(ii) Full rights of inspection of the Article 8(4) documents is already given under Article 8(5)(c) (with a threat of criminal sanction under Article 8(6)). If Article 13(1)(a) was to be limited to the Article 8(4) documents, then it would be entirely redundant.
(iii) Article 13(1)(a) gives the limited partner "the same right as a general partner" to inspect the limited partnership records, and it cannot sensibly be argued that a general partner, who under Article 11 has all the rights and powers of a partner in a partnership without limited partners, could be so restricted. Self evidently, a general partner must have access to all of the records of the limited partnership business which he or she manages and under Article 13(1)(a) a limited partner has the same rights.
(iv) Articles 13(1)(a) and (b) give quite distinct rights. Under Article 13(1)(a), the limited partner is given the right simply to inspect the limited partnership records to make of them what he or she can. Article 13(1)(b) is in two parts. In the first part, the limited partner has the right to be given "on demand" true and full information of all things affecting the limited partnership. This goes beyond mere inspection of documents, to the provision of information by the general partner who has the conduct of the partnership business. One can envisage many circumstances in which mere sight of records itself is insufficient to give a true understanding of the partnership business and that further information is required to explain those records This part of Article 13(1)(b) is not qualified by the words "whenever circumstances render it just and reasonable"; indeed that information is to be given on demand. Under the second part of Article 13(1)(b), the limited partner has the right to be given a formal account of the partnership affairs, and this part is qualified by the words "whenever circumstances render it just and reasonable". It seems appropriate that true and full information should be given on demand to a limited partner, who is, after all, a part owner of the business but that a formal account, a no doubt costly and time consuming exercise, should only be given where it is just and reasonable.
39. Accordingly, we conclude that limited partnership records in Article 13(1)(a) extends beyond the records that have to be maintained under Article 8(4) and the accounting records that have to be maintained under Article 9, to all records of the limited partnership. The issue then arises as to what constitutes the records of the limited partnership. Given its ordinary meaning, a record is a piece of information or a description of an event written on paper or stored on a computer- (Cambridge dictionary).
40. The leading English authority upon which both counsel relied is Inversiones v Colyzeo. In that case, the limited partners "IFS" and "IVS" who had lost half the value of their investment, sought information about the partnership from the general partner "Capital" and the manager "CIM", to which investment management and operating services functions had been delegated. IFS and IVS sought to inspect all books and records of the partnership and listed over 60 categories of documents. Capital and CIM argued that they had no right to any of these documents, other than "books of account". Norris J dealt with these extreme positions as one of principle. Before setting out his findings, it should be noted that the management agreement in that case gave the limited partners the right "at all reasonable times to have access to and rights to inspect books and accounts of the partnership" which is in slightly different terms to section 6(1) of the Limited Partnerships Act 1907 ("the 1907 Act"), which is in these terms:
"(1) A limited partner shall not take part in the management of the partnership business, and shall not have power to bind the firm:
Provided that a limited partner may by himself or his agent at any time inspect the books of the firm and examine into the state and prospects of the partnership business, and may advise with the partners thereon."
Norris J found that that the rights of the limited partners under the management agreement and under the 1907 Act were cumulative.
41. It is also relevant to note that the position as between partners in an ordinary English partnership is set out in the following sections of the Partnership Act 1890 ("the 1890 Act"):
"24 Rules as to interests and duties of partners subject to special agreement.
The interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any agreement express or implied between the partners, by the following rules:-
(1) to (8) ...
(9) the partnership books are to be kept at the place of business of the partnership (or the principal place, if there is more than one), and every partner may, when he thinks fit, have access to and inspect and copy any of them."
"28. Duty of partners to render accounts, &c.
Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives."
42. We think it helpful to set out the conclusions of Norris J in paragraph 23 at some length as follows:
"(a) ...
(b) Every partner has a right to disclosure by his co-partner of all matters relating to the partnership dealings and transactions: this was the principle stated by Lord Lindley and it finds its current expression in section 28 of the Partnership Act 1890 which provides that
'.. partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives.'
(c) This is as much the right of a limited partner as it is the right of an ordinary partner. Section 7 of the 1907 Act says that the provisions of the 1890 Act and the rules of equity and of common law applicable to partnerships (except insofar as they themselves are inconsistent with the 1890 Act) apply to limited partnerships.
(d) Section 7 of the 1907 Act is expressed to be 'subject to the provisions of this Act'. Section 6 of the 1907 Act restricts the right of a limited partner to take part in the management of the partnership business and says that he does not have the power to bind the firm: but it is not implicit in either of these restrictions that the limited partner's right to information about the partnership business is restricted. His capital remains at risk in the partnership business, the entire conduct of which he has entrusted to the general partner. There is every reason why the general partner should be obliged to render a true account and provide full information. It is simply an aspect of the central duty of good faith which the general partner owes to the limited partners as the party having the sole power to bind the partnership. The fact that the general partner has delegated the exercise of some of his powers as general partner (and the performance of some of his duties) makes no difference.
(e) The 1907 Act recognises this right. The proviso to section 6(1) of the 1907 Act is not conferring some peculiar right on limited partners. It is recognising the right which every partner has ('at any time [to] inspect the books of the firm and examine into the state and prospects of the partnership business') and is making clear that the exercise of that right will not constitute [taking] part in the management of the partnership business'. That is why it takes the form of a proviso.
(f) ...
(g) ...
(h) ...
(i) In deciding what is the content of this obligation fine distinctions are not be drawn between 'the books and accounts of the Partnership', 'the books of the firm', 'the books and records of the Partnership', 'statements reports and accounts', 'books of the Partnership', 'records and books of account of the Partnership' and 'Partnership records and books' because the draftsman of the Deed and of the Management Agreement does not appear to have used language with such precision that one can say he was consciously departing from the statutory language or was consciously creating different categories of information to be recorded and accessed and different rights of inspection, examination and copying.
(j) That which CIM had to maintain (and that which Capital would otherwise have had itself to maintain but for the delegation to CIM) was a record (either by processing raw data so as to make key data accessible) of the Partnership's business and affairs sufficient to enable a partner, whether general or limited, with access to it to examine into the state and prospects of the partnership business. I use language derived from the 1907 Act. But I also have to mind the words of Collins LJ in Bevan v Webb [1901] 2 Ch 59 at 68 (expressed in relation to section 24(9) of the 1890 Act):-
'... What is the object with which this right, or permission, or privilege is given to each of the partners in a partnership? What is the common sense meaning of it? Surely the object is to enable the partners to ascertain the position of the partnership business. The partnership business is their own business, the books are their own books, and each of them has a right in them. Of course, their rights are qualified and regulated by the corresponding rights of the other partners, but the books which they desire to inspect and which they have a right to inspect, are their own books. For what purpose is this provision made? It must be that the partners may be able to inform themselves of the position of the partnership'.
(k) What is required to fulfil such a general obligation will vary from case to case depending on the nature of the partnership business and its mode of conduct and the terms of the governing documents read in the light of current business practice. There is little to be gained by looking at the decided cases to see if they establish categories of document which as a matter of law every partnership must maintain as part of its records and which every partner has a right to inspect. The test is a functional one. As a rough rule of thumb, if it would be necessary or advantageous for CIM or Capital to rely on the document or record in order to establish the rights of the Partnership as against a third party, or in order to determine or adjust the rights of the partners inter se, then it is a 'book, document or record' which relates to the affairs of the Partnership, and a limited partner is entitled to see it and if the Partnership has paid for the document that would also establish that it related to the affairs of the Partnership (for why else would a fiduciary agent like Capital or CIM charge the Partnership for it?)
(l) In this case the starting point is clause 11.1 of the Deed. CIM had to keep full and accurate books of the Partnership (separate from its own books and separate from the books of Capital) showing all receipts and expenditure, assets and liabilities, and profits and losses and all other books, records and information necessary for recording the Partnership's business and affairs. If CIM has not done so then the limited partners must see the primary documents from which such books of the Partnership would have been prepared. If CIM has done so then the limited partners are in principle entitled to inspect the documents which record and which establish (for example) the assets and the liabilities.
(m) They are entitled (in order to gain an understanding of the state of the partnership business) to establish the existence of those assets. Where physical assets are held by the Partnership, this will comprise the documents of title and any documents recording terms which survive completion of the acquisition transaction (like "overage" or put options). Where rights of action are held by the Partnership this will comprise the documents giving rise to the right of action (the joint venture agreement and any relevant schedules relating to the use of the Partnership's participation, or the constitution of the SPV and the documents which establish the exact level or nature of the Partnership's participation). The same is true of the liabilities to which the Partnership is directly exposed (under lease or hedging arrangements) the limited partners may see the documents from which the liabilities derive. If under GAAP the liability of an SPV should be shown as a liability of the Partnership then the limited partner must see the documents relating to that.
(n) Proper reports to the limited partners will have put a value on the assets and will have quantified the liabilities. The limited partners are in my judgment in principle entitled to see the documents which support those valuations (be that value based on "cost less impairment", "fair value", a DCF analysis, NAV and/or an earnings multiple). If the value is based on CIM's own data (and so in GAAP parlance is "unobservable") then the limited partners should in principle see that data. It is not possible to understand the state of the Partnership business (or to confer or "advise" with the other partners as to the prospects of the Partnership business) without understanding the robustness of the attributed values and to what matters they may be sensitive.
(o) If the Partnership has directly paid for professional advice about the acquisition, retention or valuation of an asset or the incurring of or exposure to a liability by itself paying the fee or reimbursing Capital or CIM for the fee under clause 4 of the Management Agreement) then the limited partner may see that. But if the cost of such advice has ultimately been borne by Capital or CIM and absorbed as part of its operating expenses then in principle such a document would not form part of the Partnership books and records unless it relates to the current state of the Partnership or the current prospects of the Partnership (and so relates to some current value adopted by CIM in the accounts it renders).
(p) On the other hand advice by the Advisory Committee of the Partnership to Capital/CIM, instructions by CIM to Capital and advice by Colyzeo Investment Advisers Limited to CIM are all materials which the Deed contemplated should be generated and paid for through the remuneration of CIM and Capital in their respective capacities (rather than by way of reimbursement) and so should be available to the partners so far as such materials relate to assets and liabilities and receipts and expenditure of the Partnership business. Likewise minutes of meetings between CIM and Capital (which are reports by the agent of the Partnership to its principal acting by its general manager, or instructions or assent on behalf of the Partnership given through its general manager). All of these are in principle part of the Partnership books and records, necessary to understand the state of Partnership business and to assess and confer about its prospects. On the other hand internal minutes of CIM and its routine internal business documentation (such as telephone attendance notes or briefings prepared for meetings) would not in principle be books or records of the Partnership (and so would not be called for by limited partners).
(q) The only specific restriction is to be found in clause 5.2 of the Management Agreement. This says that CIM cannot be required to disclose to the Partnership any confidential information relating to the dealings, portfolio or affairs of another client or any other person. So some documents which at the time of the request for inspection remain confidential or contain confidential information might have to appear in redacted form (for there can be no question of CIM or Capital asserting general rights of confidence against any member of the partnership which prevent production of the document as a whole)."
43. Norris J had before him the management agreement between Capital and CIM, whereas we do not have before us the administration agreement between the Limited Partnerships and Sanne in order to ascertain its obligations and any rights given directly to the Limited Partner, and he made this point at paragraph 24:
"24 I have so far looked at the nature of the rights which IFS and IVS have. But against whom may those rights be enforced? In my judgment they may be directly enforced against Capital and the other members of the Partnership because they are statutory and contractual rights arising under the Deed to which Capital was a party. Capital promised (and was under a duty as a partner to provide) to IFS and IVS all records and books of account of the Partnership and Capital (as general partner) can procure that CIM fulfils its obligation under the Management Agreement to afford such access. But the rights cannot be directly enforced by IFS and IVS alone against CIM because there is no direct individual contractual relationship (save perhaps under clause 3.6 of the Deed which purports to be a direct covenant by CIM with the limited partners.) The relationship constituted by the Management Agreement is between CIM and the Partnership. As limited partners IFS and IVS are not agents of, and have no authority to act on behalf of the Partnership and to bring an action in its name or otherwise enforce rights vested in all members of the Partnership as a body. Their individual remedy (if any) against CIM would seem to be in tort (inducing Capital to breach the partnership contract by not performing the Management Agreement so as to enable Capital to comply with its obligations as general partner) but that is a tentative view because the matter was not fully argued."
44. As to the motive behind or purpose in seeking disclosure, Norris J said this at paragraphs 26 - 29:
"26 In my judgment the question of motive or purpose is irrelevant to the exercise of a statutory right of access to the partnership books. I accept the proposition (stated in Lindley and Banks on Partnership (19th edition) paragraph 22-16) that because the statutory right of inspection is expressed in unqualified terms the motives and bona fides of the partner seeking to exercise it will be irrelevant.
27. I would accept that the position may be different in relation to the exercise of a contractual or other non-statutory right. There, if it is absolutely clear that the partner is using a contractual right to obtain partnership documents not for the purpose for which it is expressly or implicitly conferred (in connection with his interests as partner) but for the purpose of injuring the partnership, or for some other manifestly improper purpose, then the Court will not assist the partner to exercise the right to access partnership books, receipt and information: compare Oxford Legal Group Limited v Sibbasbridge Services Ltd [2008] EWCA Civ 387 at [24]. But that principle can only apply in very plain cases: otherwise (as Slade I pointed out in Conway v Petronius Clothing Limited [1977] 2 WLR 72 at 901) a right of inspection could be rendered more or less nugatory by specious allegations that it was being exercised with intent to injure or for some other improper motive. The principle has no application here. It is simply not the law that if a partner thinks he may have grounds to complain about the way a general partner (or its delegate) has performed its obligations then the partner thereby loses any right to obtain access to partnership documents.
28. Control is exercised not by restricting access to the information but by restricting the use that can be made of the information obtained. Thus in Trego v Hunt (1896) AC 7 it was suggested that a partner wished to obtain access to books for the purpose of identifying customers whom he could solicit when he set up in business on his own. Lord Davey said (at 26):-
'The notice of motion asked that the defendant might be restrained from making any copy or extract from the books of the partnership for any purpose other than the business of the partnership. In my opinion the relief asked was misconceived. As well under the general law as under the express provisions of the articles of partnership, the defendant was entitled during the partnership to have access to the books and to make copies thereof or extracts therefrom. It is conceivable that, if the defendant proposed to use such extracts for purposes injurious or hostile to the interests of his firm, he might be restrained from doing so. But in such case it would not be the obtaining of the information, but the use the partner proposed to make of it when obtained, which would be restrained.'
29. The purpose for which access is required cannot affect the type of partnership document or record to which a partner has a statutory or contractual right of access, and in the instant case the evidence of Capital and CIM comes nowhere near establishing impropriety sufficient to bar access generally. This ground of objection to the production of documents therefore cannot be sustained."
45. In paragraph 23(r) of his judgment Norris J found that the reference in section 6(1) of the 1907 Act to the purpose of inspection being to examine "the state and prospects of the partnership business" restricted the extent of disclosure to the current state and prospects of the partnership:
"(r) The only general restriction is that the documents and information relate to the business and prospects of the Partnership as it is. What might have been (offers that were unsuccessfully solicited, applications which failed, proposals that did not come to fruition, drafts that were subsequently altered) is not relevant to the current state and prospects of the Partnership and would not in my judgment be in principle open to inspection or copying, unless they were documents for which the Partnership paid because the cost of their preparation was treated as an operating expense of the Partnership (in which case the limited partners would be entitled to see what was done with the Partnership money)."
46. Article 13(1)(a) of the 1994 Law does not contain that restrictive wording. Although in practice little may turn on this as the object of the right to inspect, as per the passage for Bevan v Webb referred to above, is to enable the limited partner to ascertain the position of the partnership business in which the limited partner has invested. However the right to inspect under Article 13(1)(a) is expressed in unqualified terms and the motive or purpose in that right being exercised is irrelevant. The extent to which the Court will enforce that right will be a matter of discretion as explained below.
47. Advocate Cook submitted that the functional test to which Norris J refers governs what documents are to be disclosed to the Limited Partner and that the Respondents needed to know the purpose of the request for disclosure in order to apply the functional test, but it is clear that it relates to what records the partnership will keep, and that would depend upon the nature of the partnership business, its mode of conduct and the terms of the governing documents. As it states in Lindley and Banks on Partnership at paragraph 22-13:
"22-13 Limitation on the right of access
It is submitted that the right of access afforded by section 24(9) is an absolute one and cannot be artificially restricted, otherwise than by prior agreement. Thus, in one old case an order was made against a surviving partner and executor of his deceased partner's will allowing a beneficiary to inspect the partnership books even though they contained his private letters which were not material to the issues in the action. Indeed, the section was the foundation for the decision in Wan v General Commissioners for Division of Doncaster, where a penalty was held to have been properly imposed on each partner for failure to provide information to the Inspector of Taxes which any of them could have obtained by exercising that right. It is, however, suggested in one commentary that the functional test formulated by Norris J in Inversiones Frieira SL v Colyzeo Investors II LP can be applied to limit a partner's right of inspection, but it is submitted that this is to misinterpret the nature of the test, which was formulated to assist in identifying what books are required to be kept in the context of a limited partner's inspection of the partnership books in the particular circumstances contemplated by section 6(1) of the Limited Partnerships Act 1907. The suggestion that the right does not extend to papers to do with every aspect of the partnership business or its customers/clients, on the grounds that these may be confidential, is misplaced and, in any event, based on a misreading of Norris J's decision in Inversiones."
48. Having received this decision as to the principles to be applied, the parties were back before Norris J a year later, having been unable to reach agreement. 76 files had been disclosed by Capital and CIM, 44 of these after review in the light of the principles set out in his judgment. IFS and IVS had focused on "entitlement", looking at each of the categories of documents of which production was claimed, and then asking in relation to each category whether, if documents of that type existed, their production for inspection could be justified. Capital and CIM had reviewed what documents actually existed and then assessed each document that actually existed against the principles set out in the judgment, as to whether it formed part of the partnership "books" to inspection of which the limited partners were entitled. Quoting from paragraphs 6 and 7 of his judgment in Inversiones Frieira SL and another v Colyzeo Investors II LP and another [2012] EWHC 1450 (Ch):
"[6] It is regrettable that this metaphysical debate should have stood in the way of getting to [IFS and IVS] the documents they need for an understanding of the affairs of the partnership insofar as it arises from any lack of clarity in the first judgment I apologise to the parties. I had intended clearly to communicate my view that what must be shown to the limited partners will vary from case to case (depending on the nature of the partnership business and its mode of conduct), that there was little to be gained by looking at decided cases to see if they established categories of document which as a matter of law every partnership had to maintain and which every partner had a right to inspect, and that the whole process should be grounded upon what documents actually existed, and their function, and not upon abstract categories.
[7] As a starting point, the process undertaken by the Defendants was essentially that which I envisaged. Whilst I recognise (and would underline) the fact that affording to limited partners access to the partnership books is not a process of disclosure (like that under the CPR) I do agree with the sentiment expressed in a letter from Clifford Chance dated 15 August 2011 'We do not consider that the parties can endeavour to agree the application of the principles without knowing what documentation actually exists'."
49. And then at paragraphs 16 and 17:
"[16] The fourth point to make is that [IFS and IVS] were anxious to stress (i) that they were seeking to exercise contractual and equitable rights to inspect partnership books and documents (and doing so by means of a Pt 8 claim) and (ii) they were not seeking to enforce an obligation to make specific disclosure. Accordingly, they argued that to obtain an order they did not have to establish that the claimed documents existed, or that there were any gaps in the documents contained in the 76 files which [Capital and CIM] had disclosed. They simply had to establish their technical entitlement to documents of the type included in any given category, and it was then for the court to order production and inspection of every document within that category. If documents of type "X" existed then the court had to order production of type "X" documents and neither the court nor the general partner could restrict [IFS and IVS's] right to only such of the documents of type "X" as would be sufficient for it to understand the partnership business. The order must be made. If there were none, or no more than had already been provided, then Capital/CIM had to do nothing.
[17] I disagree. The matter is not to be approached on such an abstract basis. Capital has, in the light of the principles set out in my first judgment, identified and collated a substantial body of documents which it acknowledges are partnership documents. In practice, the onus is now on [IFS and IVS] to indicate in what respects the available documents are not sufficient to enable [IFS and IVS] to examine into the state and prospects of the partnership business and consult with the other limited partner thereon, or indicate the existence of other documents that would be just as material to that exercise as those which have been provided. That is partly because the court will not grant an injunction which has no practical effect. It is partly because the court will not direct the incurring of expense which may have to be borne by the partners generally simply upon the request of one limited partner who cannot demonstrate that the incurring of that expense secures any practical advantage. In this area (as in others where competing rights are involved, such as easements) the law does not seek to identify the precise outer limits or prescribe the entire and exact content of every rule: it provides for the core obligation and expects the associated rights to be exercised in a reasonable manner (and it will assist their exercise in that reasonable manner)."
50. Norris J went through the categories, finding that many were not disclosable. We set out three by way of illustration of his approach:
"[33] But there is no question of Capital having any obligation (as general manager of the Partnership) to make up Partnership books and records which do not at present in fact exist by using whatever share holder rights the Partnership's wholly owned SPV may have directly or indirectly against the board of the intermediate SPV or of the ultimate holding SPV. Nor do I see any basis upon which [IFS and IVS] can require Capital to get drafts or notes of conversations or memoranda or informal records of understanding or drafts of expert reports, or correspondence between the intermediate or ultimate SPV on the one hand and third party co-investors on the other. In no sense is this material part of the 'books documents and records' of the partnership: and in my judgment the General Manager is not required to obtain it pursuant to any general duty to provide information about the Partnership. The suggestion that Inversiones has in some sense 'paid for' this material is not tenable. They and the other limited partners have paid the charges and reimbursed the Manager's general expenses. But that does not mean that [IFS and IVS] has bought a share in every piece of paper produced by anyone who has rendered a fee part of which has ultimately been borne out of the [IFS and IVS] contribution (or charged against income to which [IFS and IVS] would otherwise have been entitled).
[39] In that context a request for 'all documentation' relating to a transaction that did not proceed, including all instructions (whether formal or informal) to advisers and all advice sought for on behalf of the Partnership (whether such advice be in draft or final form), any documentation setting out the basis upon which the scheme should be presented to the limited partners, and all documentation in relation to proposed alternatives that might have been considered, is simply unreasonable. [IFS and IVS] made their choice and the business of the Partnership (in relation to which they can seek to inspect books documents and records for the purpose of understand that present business and conferring with the other limited Partners upon it) has been shaped by that choice. As I have indicated above, advice about dilution directly tendered to the Partnership is a partnership document that I would expect to be in the possession of Capital as general and managing partner (or of CIM, its delegate).
[40] Category 9 seeks what is in substance primary transactional documentation. It seeks a complete breakdown of all commitments, including details of when those commitments were made and when the Partnership contributions were made in relation thereto. It seeks a complete breakdown of all investments, including full detail of the investments made, the amounts invested and when invested, and when the Partnership committed to the investments. It seeks all relevant sale and purchase agreements of investments and hedging products. It seeks investment income documentation. It seeks a schedule of investments (including opening balances, addition, disposals, revaluations, unrealised and realised gains and losses and details of the proceeds of sale). This is rather like a limited partner in a retail business asking for a copy of all till receipts. I do not understand from the submissions why the production of the Partnership's General Ledger is insufficient, or why the 'decision file' did not contain any sufficient explanation as to why transactions were undertaken, or why the Funding Packages did not disclose how the investments were undertaken. Insofar as the request relates to primary accounting documents (such as income receipts) I could not understand why the audited accounts and statements were insufficient for the purpose. Since the focus of the request seemed to be the Accor and the Carrefour transactions (rather than every single transaction entered into by the Partnership) and they have been the subject of extensive disclosure, I would make no further order."
51. Turning to the contractual rights of the Limited Partner, Clause 6(1)(b) of the Limited Partnership Agreements provides as follows:
"The Limited Partners .... and their duly authorised agents shall at all reasonable times have access and the right to inspect the books and accounts of the partnership."
Whilst "books and accounts" might be asserted to be a somewhat narrower category of documentation as compared with "the records" of the partnership, the contractual terms of the Limited Partnership Agreements do not purport to override the statutory rights of the Limited Partner under the 1994 Law, rights which as in Inversiones v Colyzeo are cumulative.
52. Drawing all this together, we would summarise the position as follows:
(i) The "limited partnership records" in Article 13(1)(a) of the 1994 Law comprise:-
(a) The formal documents required to be maintained at the registered office of the limited partnership under Article 8(4);
(b) The accounting records required to be kept under Article 9;
(c) All other records of the partnership business kept by the limited partnership and this will depend upon the nature of the partnership business, its mode of conduct and the terms of the governing documents read in the light of current business practice ("the functional test").
(ii) The issue of what should be disclosed should not be approached on an abstract basis by reference to categories or types of documents, but by a review by the general partner of what documents actually exist and an assessment whether they form part of the partnership records or not.
(iii) Save as set out above, the general principles set out in the judgment of Norris J in Inversiones v Colyzeo offer helpful guidance as to what should or should not be disclosed under Article 13(1)(a), although it should be borne in mind that it is guidance given on the facts of that case and in the light of the contractual documentation as between Capital, the general partner, and CIM, the manager.
(iv) The motive or purpose of a limited partner exercising its rights under Article 13(1)(a) is irrelevant, because the right is expressed in unqualified terms.
53. Advocate Drummond submitted that under Article 13(1)(a) of the 1994 Law an officer of the Limited Partner had the right to attend the offices of Sanne during business hours and to be given by Sanne unrestricted access via a computer terminal to all of Sanne's electronic records in relation to the Limited Partnerships in addition to any physical records. He was concerned with the possibility of the Respondents going through those records and as he said "filleting out" documents from the disclosure exercise.
54. There are a number of difficulties with such a literal approach to the rights of a limited partner in this case. We have not seen the administration agreement between the Limited Partnerships and Sanne, but on the information currently before us, the Limited Partner has no contractual rights as against Sanne in this respect and no ability to require Sanne to give it any kind of access to its computer system. Furthermore, Sanne is not before us, and we have no jurisdiction to impose any kind of order upon it.
55. The Respondents can no doubt authorise Sanne to give disclosure of records it maintains on behalf of the Limited Partnerships to the Limited Partner and to which the Respondents have right of access as against Sanne.
56. The Limited Partner cannot demand unrestricted access to documents which may or may not constitute the Limited Partnerships' records. It is necessary for the Respondents first to ascertain what documents exist and then decide whether they form part of the partnership records which the Limited Partner is entitled to inspect. It is not, in the first instance, for the Limited Partner to decide what is or is not a partnership record.
57. The right to inspect under Article 13(1)(a) is a right exercisable only in respect of documents that actually are limited partnership records and that pre-supposes that the person obliged to make that disclosure (primarily the general partner) must go through the exercise of identifying what documents exist and whether they do or do not form part of the records of the partnership business.
58. Advocate Cook raised the duty of confidentiality that may be owed by the Limited Partnerships to third parties such as third party investors in the Underlying Funds and at the hearing Advocate Drummond did not press for records in relation to third party investors to be disclosed. The issue was not taken any further, but we observe that the Limited Partner is a partner in and therefore part owner of each Limited Partnership business and is bound in the same way as the Respondents by the confidentiality provisions in Clause 17 of the Limited Partnership Agreements. On the face of it, and as stated in the passage from Lindley and Banks on Partnership cited above, the rights of a limited partner extend to every aspect of the partnership business and its customers/clients and it is difficult to see how a limited partner being given access to such information can constitute a breach of confidentiality owed by the Limited Partnerships to such customers/clients. We can appreciate, however, the Respondents' sensitivity on this issue.
59. Article 13(1)(a) establishes the core right of the Limited Partner to inspect the limited partnership records, but when it comes to invoking the aid of the Court, Article 26(1) gives the Court a discretion as to what order it will make:
"Where a person who is required by this Law to sign, deliver or permit inspection or copying of a document refuses to do so, a person who is aggrieved by the refusal may apply to the Court for an order directing the person to comply with the provisions of this Law and upon such application the Court may make such order or any other order it considers appropriate in the circumstances."
Although not canvassed in discussion, the Court must have the same discretion under the customary law.
60. We agree with what Norris J said at paragraph 17 of his second judgment referred to above. In this case, the Respondents have set out in the two letters from Mourant dated 26th May and 3rd June 2020 a substantial body of documents, which they acknowledge are records of the Limited Partnerships and they will submit to an order for their disclosure within seven days. We agree that those documents must now be disclosed and will make an order to that effect. The onus will then be upon the Limited Partner to indicate in what respects the available documents are not sufficient to enable it to examine into the business of the Limited Partnerships or to indicate the existence of other documents that would be just as material to that exercise as those which have been provided.
61. Subject to what we say below, that is the only order that the Court is prepared to make, certainly at this stage, under Article 26 or under the customary law. In particular, the Court is not prepared to make an order in the form contained in paragraph 2(b) of the Representation because the effect of such an order would be unreasonably wide, extending to every single record of the businesses of the Limited Partnerships down the last "till receipt" and going back to the inception of each partnership business, much of it being no doubt of no practical effect and placing upon the partners generally an expense that secures to the Limited Partner no practical advantage. The Court will assist the Limited Partner in the exercise of its rights but only in a reasonable manner.
62. Whilst affording a limited partner access to the limited partnership records is not a process of discovery under the Royal Court Rules, a general partner cannot be left as the sole arbiter of what constitutes a record of a limited partnership and what need or need not be disclosed to a Limited Partner. We think it fair therefore that the disclosure made by the Respondents should be accompanied by an affidavit which, subject to the further input of counsel, should we suggest:
(i) Set out what reasonable steps have been taken to search for the records of the Limited Partnerships; and
(ii) Where a decision has been taken that records of the Limited Partnerships need not be disclosed, those records or categories of records should be identified.
63. It was agreed by Advocate Drummond that paragraph 2(c) of the Representation should be left over, although we express some concern as to how the Respondents can realistically be expected under the first part of Article 13(1)(b) to provide "true and full information" of all things affecting the Limited Partnerships in the abstract. It might be argued that this provision is intended to enable a limited partner to demand information in a targeted fashion in relation to aspects of the limited partnership business that are not clear from the disclosure that has been made. As to a formal account, Advocate Drummond informed us that the Respondents had not produced any financial accounts as they are required to do under Clause 13.1 of the Limited Partnership Agreements (although we note that the Respondents have offered to provide unaudited accounts for the year ending 31st March 2019), but to the extent that a formal account differs from financial accounts, the Court will need to be addressed on precisely what is meant by the term "formal account" and whether and when it is just and reasonable to order the same.
Authorities
Limited Partnerships (Jersey) Law 1994.
Inversiones Frieira SL, Inversiones Valea SL v Colyzeo Investors II LP, Colyzeo Investment Management Limited [2011] EWHC 1762 (Ch).
Bennett v Lincoln [2005] JLR 125.
Cannon v Nicol [2006] JLR 299.
Lindley and Banks on Partnerships 20th edition.
Limited Partnerships Act 1907.
Partnership Act 1890
Lindley and Banks on Partnership.
Inversiones Frieira SL and another v Colyzeo Investors II LP and another [2012] EWHC 1450 (Ch).
Royal Court Rules