Flanagan v Liontrust Investment Partners LLP and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 04 March 2016 |
| Neutral Citation | [2016] EWHC 446 (Ch) |
| Court | Chancery Division |
| Date | 04 March 2016 |
| Docket Number | Case No: 6164 of 2013 |
[2016] EWHC 446 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Rolls Building
Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Mr Justice Henderson
Case No: 6164 of 2013
Mr Andrew Thompson QC and Mr Alex Barden (instructed by Bolt Burdon) for the Petitioner
Mr John Machell QC and Ms Jennifer Haywood (instructed by Macfarlanes LLP) for the Respondents
Hearing date: 4 December 2015
Judgment on Consequential Matters
Introduction
On 4 December 2015 I heard argument on consequential matters arising from the judgment in this case which I handed down on 24 July 2015, following the trial on liability issues which had taken place between 20 January and 6 February 2015: see Flanagan v Liontrust Investment Partners LLP and Others [2015] EWHC 2171 (Ch), now reported at [2015] Bus LR 1172. The present judgment assumes familiarity with, and should be read as a sequel to, the earlier judgment, to which I will refer as "the main judgment".
There were four matters on the agenda for the hearing in December 2015:
(1) the validity of the third termination letter (discussed, on a provisional basis, in the main judgment at [163] to [168]);
(2) costs;
(3) the form of relief to be granted; and
(4) any applications for permission to appeal.
I heard argument on the first, second and third of these matters, it being agreed that the question of permission to appeal should be deferred until I have given my ruling on the other matters.
(1) The validity of the third termination letter
It is common ground that the validity of the third termination letter depends on whether Mr Flanagan was still a member of the Management Committee in December 2014 when the meeting of the Committee at which he was required to retire as a member of the LLP was convened (on 10 December) and held (on 18 December). If Mr Flanagan was no longer a member of the Management Committee, there is no dispute that the notice given to him in the letter was valid, and his membership of the LLP therefore terminated on 22 June 2015, six months after the letter was delivered to him on 22 December 2014. If, on the other hand, Mr Flanagan was still a member of the Committee, the notice given to him must have been invalid because he was never given notice of the meeting on 18 December at which the decision to remove him was taken and the terms of the letter were approved: see clause 12.6 of the LLP Agreement, which expressly renders void any decision of the Committee taken at a meeting of which proper notice had not been given.
At the trial, Liontrust argued that Mr Flanagan's membership of the Committee had indeed come to an end before December 2014, for either or both of the following reasons. First, Mr Flanagan's membership of the Management Committee depended upon his status as an "approved person for the purposes of the FSA Rules" under clause 12.2 of the LLP Agreement, and Mr Flanagan had ceased to be an approved person when Liontrust de-registered him with the FSA on 4 October 2013. Secondly, by a document dated 1 August 2013 Mr Abrol, on behalf of LIS, informed the LLP that LIS consented "to all Individual Members being appointed as Committee Members", but then went on to list ten members by name (in some cases with another member shown as an alternate), who did not include Mr Flanagan. The argument was that, by means of this document, LIS had effectively removed Mr Flanagan from his previous membership of the Committee.
My provisional view was that each of these points should be determined in Mr Flanagan's favour, with the result that the third termination letter (like its predecessors) was invalid. I did not, however, express a concluded view, because the third notice had not been dealt with in the pleadings or witness statements, the minutes of the Management Committee meeting on 18 December 2014 were not in the bundle, and I heard only brief argument on the two issues which I have identified. Mr Thompson QC nevertheless submitted, on behalf of Mr Flanagan, that it would be inappropriate for me to revisit my provisional conclusion, because the parties had been content for me to proceed on the basis of the limited material before me, and both sides had addressed the question in their written closing submissions. Mr Thompson said that the court could therefore properly have expressed a final conclusion. That may well be right, but the fact is that I chose to deal with the matter on a provisional basis, and, having done so, I think it would be wrong to preclude Liontrust from trying to persuade me that my initial view was wrong. In the event, Mr Thompson did not press the objection in his oral submissions, nor did he submit that the question was res judicata. I am satisfied, therefore, that it is open to me to revisit my preliminary conclusion.
I will begin with the document of 1 August 2013. It was typed on the headed notepaper of LIS, and addressed to the LLP at 2 Savoy Court, London, WC2. It was signed by Mr Abrol as director, for and on behalf of LIS. The body of the document read as follows:
"Dear Sirs
Appointment of Committee Members
Pursuant to Clause 12.3.2 of the amended and re-stated limited liability partnership agreement relating to the LLP dated 19 July 2012 and made between Liontrust Investment Services Limited (1), the several persons named in the agreement (2) and the LLP (3) (the " LLP Agreement"), we hereby consent to all Individual Members being appointed as Committee Members.
John Ions (LIS Member)
Vinay Abrol
Edward Catton
Stephen Bailey (Jan Luthman as Alternate)
Anthony Cross (Julian Fosh as Alternate)
James Inglis-Jones (Sam Gleave as Alternate)
Michael Mabbutt (Felix Martin as Alternate)
Mark Williams
Richard Farquhar (Matt Tonge as Alternate)
Neale Soffe"
The document needs to be read in the light of Mr Abrol's unchallenged evidence in paragraph 14 of his first witness statement, which reads as follows:
"Although the Individual Members were all appointed as Management Committee members in July 2010, I do not believe that a properly convened meeting of the management committee was held until 8 October 2013. Until 8 October 2013, rather than holding management committee meetings, management-related matters were discussed at meetings held by three different (albeit overlapping) groups of members within the LLP: the Fund Management Group, the Asset Gathering Group and the Operations Management Group. Members of the LLP would be invited to and would attend whichever meetings reflected their role and some members would attend the meetings of more than one group. I attended all three. Issues relating to fund management would be discussed at the Fund Management Group meetings, operational matters would be discussed at the Operations Management Group meetings and Asset Gathering Group had a sales/marketing focus. In around August 2013 it was decided to change the structure and to start holding management committee meetings but with a reduced number of members of the committee. A notice giving effect to the changed [ sic] in structure and appointing certain Individual Members as Management Committee members was issued by LIS on 1 August 2013 …"
Without objection from Mr Flanagan, Liontrust now also relies, by way of corroboration of Mr Abrol's evidence, on an email sent by Mr Catton on 1 August 2013 to the others members of the LLP, excluding Mr Flanagan, even though it was not included in the trial bundles. The subject of the email was "Corporate Governance Changes", and so far as material it read as follows:
"Dear Members,
As you should be aware, the Board has decided to rearrange the Corporate Governance Structure of the company by replacing the current formal OMG, AGG and FMG meetings with two quarterly partnership management committees, the Liontrust Fund Partners LLP Partnership Management Committee and the Liontrust Investments Partners LLP Partnership Management Committee.
The responsibilities are split between the two meetings as follows:
[ details were then given, and it was explained that an executive committee had also been set up by the Board, followed by a diagram showing the new committee structure]
As detailed in the partnership agreement, and in the attached terms of reference, the members of the Partnership Management committees will not be all the partners in the partnership. The Board has decided that the committees are likely to be run more effectively with a smaller committee size. The membership of the various committees are detailed below:
Executive Committee
John Ions
Vinay Abrol
Jonathan Hughes-Morgan
Adrian Collins
LFP
…
LIP
[ There then followed the same list of names and alternates as shown on the document of 1 August 2013]
The existing OMG and AGG meetings may continue as less formal meetings to help co-ordinate the day to day activities of the business but they will no longer be governing committees of the company. The first partnership meetings are due to take place in Q3, if you have any questions on the new structure then please contact either myself or Vinay."
Finally, it is relevant to have in mind the terms of the initial appointment of all individual members of the LLP as Management Committee members on 8 July 2010: see paragraph 12 of the main judgment. Like the subsequent document of 1 August 2013, this document was typed on the headed notepaper of LIS, addressed to the LLP at 2 Savoy Court, and signed by Mr Abrol as director for and on behalf of LIS. Indeed, one can infer from the common layout and appearance of the two documents, and a common typographical error in the description of the capacity in which Mr Abrol was signing ("For an on behalf of"), that the earlier document of 8 July 2010 was cut and pasted, or otherwise...
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