Gary James Keane v David Sargen
| Jurisdiction | England & Wales |
| Judge | Jones |
| Judgment Date | 06 May 2022 |
| Neutral Citation | [2022] EWHC 1006 (Ch) |
| Docket Number | Case No: BL-2019-000814 |
| Court | Chancery Division |
[2022] EWHC 1006 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
INSOLVENCY AND COMPANIES COURT JUDGE Jones
SITTING AS A HIGH COURT JUDGE
Case No: BL-2019-000814
Mr John McDonnell Q.C. (instructed by Richard Slade and Company) for the Claimant
Ms Lesley Anderson Q.C. (instructed by Brabners LLP) for the 1–5 Defendants
Hearing dates: 21–28 February 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INSOLVENCY AND COMPANIES COURT JUDGE Jones
I.C.C. Judge
A) Introduction
The business known as “DRS” provides financial services for those engaged in the global derivatives market. It first belonged to Document Risk Solutions Ltd (“ DRSL”), which was incorporated on 12 February 2009. The business was transferred to Derivatives Risk Solutions LLP (“ the LLP”), which had been incorporated on 2 April 2012, by deed (“ the Business Transfer Agreement”) dated 14 May 2012. By that date DRSL's registered shareholders were Mr Sargen, Mr Beaton, Mr MacGloin and Mr Martin (together for convenience to be called “ the 1–4Ds”, although Mr MacGloin has recently died and the definition must be read in that circumstance).
By 18 June 2012 the Claimant (“ Mr Keane”) had left his employment with Bank of America Merrill Lynch to join the LLP. This is the date of “ the LLP Agreement” entered into by him, the 1–4Ds and DRSL. It is the agreement which governed (subject to statutory provisions) the mutual rights and duties of the LLP and its six members pursuant to section 5 of the Limited Liability Partnership Act 2000. He and the 1–4 Ds were the LLP's designated members.
Mr Keane's main case is that either through a partnership or a constructive trust he had and continues to have an equal beneficial interest in the issued share capital of DRSL of which the 1–4 Ds were the legal owners. As a result, he and the 1–4 Ds had in practice an equal interest in the LLP and he would benefit equally with them, indirectly, insofar as it made distributions to DRSL as well as from the value of DRSL's interest as a member. This is disputed by the 1–4 Ds who contend that they alone were the legal and beneficial owners of DRSL's issued share capital.
In 2013 Mr Keane twice transferred part of his interests in the LLP to DRSL, as did the 1–4 Ds in equal shares by Members' Interest Purchase Agreements (“ the MIPAs”). If he had a beneficial interest in DRSL's shares, he would continue in practice to have an equal interest in the LLP with the 1–4 Ds. If not, they alone would indirectly retain the interests sold to DRSL (his and theirs) because of their ownership of DRSL. They alone would continue to benefit indirectly from any future distributions to DRSL by the LLP.
The 1–4 Ds contend that Mr Keane never had an interest in their shares in DRSL because at a meeting on 10 May 2012 (“ the 10 May 2012 Meeting”) he decided for tax reasons to reject their offer to become an equal shareholder of DRSL when joining the LLP. It is their case that in 2013 he willingly transferred his interests for good consideration knowing that he would reduce his interest in the LLP to 4.5% and not benefit from DRSL's purchase. The 1–4 Ds in the alternative contend that in any event Mr Keane settled this dispute when by deed (“ the Deed of Asset Transfer”) dated 30 November 2017 he sold his remaining interest in and ceased to be a member of the LLP. The Deed of Asset Transfer also sold the LLP's DRS business back to DRSL and the 1–4 Ds gifted their interests in the LLP to their company.
The level of heat generated between the parties by this dispute has increased significantly because of the alternative claim of Mr Keane that he has been treated unfairly, even if the 1–4 Ds are correct in law to conclude that he never held a beneficial interest in DRSL's issued share capital. He asserts that they entered into the LLP Agreement knowing he understood that he was becoming an equal partner with them. They did not draw to his attention the fact, as they now assert, that this was not the case because he held no interest in the DRSL shares. He trusted them, they are experienced lawyers and he was misled, if what they now assert is correct.
The existence of any duty to advise or even any request for advice is denied by the 1–4 Ds and they strongly object to their professional reputations being besmirched by such an allegation. They in turn have fanned the flames by asserting that Mr Keane has throughout deliberately sought to mislead the Court concerning not only his general ability to understand legal documents but also specifically about his understanding of the LLP Agreement. The true facts being that it was his position from the 10 May 2012 Meeting that he did not want to become a shareholder of DRSL because of adverse taxation consequences. That he at all times knew when entering into the LLP Agreement that he had no interest in the DRSL shares they each owned.
I will make clear from the beginning in the light of that conflagration, first that Mr Keane's claim that he was misled was not pursued at trial. Second, that I do not accept that Mr Keane has sought to intentionally mislead the Court as alleged by 1–4 Ds.
There are two other claims to refer to. They concern the terms of the LLP Agreement and the Deed of Asset Transfer. In summary, Mr Keane claims an account of sums due on his capital and current accounts within the LLP, which has since been dissolved as a result of its removal from the register at Companies House. In addition, he claims repayment of the sums due from his loan account with DRSL.
B) The Pleaded Cases
B1) The Partnership Claim
It is not unusual for the contents of parties' statements of case to diminish in importance the nearer a case comes to trial. Sometimes they are rarely mentioned at trial, whether because they have been effectively superseded by a list of issues or because the parties fully understand each other's cases. That is not so here where it is necessary to analyse Mr Keane's statement of case in detail. That is because the 1–4 Ds contend that the case asserting a beneficial interest in the DRSL shares through partnership presented at trial bears little resemblance to the Claim Form and Particulars of Claim. Ms Anderson Q.C., their leading counsel, submits in the absence of amendment and on grounds of unfairness that the Court is not permitted to reach a decision which falls outside their ambit.
It is to be noted that this is not a case for which the List of Issues has assisted. The list was not agreed, although it is fair to observe that Mr McDonnell Q.C.'s widely drafted issues on behalf of Mr Keane would have offered him all the scope he might possibly have required for the widest of submissions had they been agreed.
Ms Anderson Q.C. correctly pointed out that the Claim Form seeks a declaration that there has been a partnership carrying on the business of holding the DRSL shares since 20 August 2012. Her first submission as a result was that any claim of a partnership existing before that date can only be made with permission to amend. She also referred to the fact that the Claim Form seeks in the alternative a declaration that the shares are held by 1–4 Ds on constructive trust for themselves and Mr Keane in equal shares. Ms Anderson Q.C. correctly observed that this was not argued by Mr McDonnell Q.C. in opening or during closing submissions.
The Particulars of Claim drafted by junior counsel, who no longer appears, can be summarised for these purposes as asserting:
a) The agreement that Mr Keane should join 1–4 Ds in the DRS business as part of a joint venture reached in 2012 was on terms that he “would have a profit and equity interest in the DRS business which would have parity with the profit and equity interest of each of [them]”. This was agreed in about March/April 2012 in the context of him receiving an equal equity stake in the then owner of the business, DRSL (paras 2 and 15–16).
b) The LLP was formed as part of a plan to restructure the DRS business model and “to ensure that the … five … had an equal interest in the joint venture it was agreed at the time of setting up the LLP and/or it was their common intention and/or understanding that the shareholding of DRSL would be held by the [1–4 Ds] for the benefit of [Mr] Keane and the [1–4 Ds] and that such holding of the shares of DRSL would be effected by a partnership between [Mr] Keane and the [1–4 Ds] in which they would be equal partners” (para 19).
c) “It … was the common intention and/or understanding … deduced from their express agreement and/or conduct that they would equally enjoy the equity and the benefits and suffer the losses of the joint venture” (para 20).
The particulars supporting paragraph 20 of that statement of case include the matters summarised at paragraph 13(a) above, refer to email correspondence of 10 May 2012 and rely upon both the Business Transfer Agreement and the LLP Agreement. By reference to paragraph 20 and its particulars it can be observed, therefore, that the claim does not refer to 20 August 2012 but pleads a case of an entitlement to the beneficial interest in the DRSL shares existing by the date of the LLP Agreement, 18 June 2012 and resulting from an agreement concerning Mr Keane joining the DRS business in March/April 2012.
The pre-penultimate particular of paragraph 20, sub-paragraph 20.6, pleads that the parties...
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Gary James Keane v David Sargen
...COURTS OF ENGLAND AND WALES BUSINESS LIST (ChD) Insolvency and Companies Court Judge Jones (sitting as a Judge of the High Court) [2022] EWHC 1006 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Lesley Anderson KC (instructed by Brabners LLP) for the John McDonnell KC (instructed by R......