Herberstein v TDR Capital General Partner II LP
| Jurisdiction | Scotland |
| Judge | Lord Ericht |
| Judgment Date | 18 June 2021 |
| Neutral Citation | [2021] CSOH 64 |
| Court | Court of Session (Outer House) |
| Docket Number | No 21 |
[2021] CSOH 64
Outer House
Lord Ericht
Coxall v Stewart 1976 SLT 275
Cunningham-Jardine v Cunningham-Jardine's Trs 1979 SLT 298
Davidson and Begg Antiques Ltd v Davidson 1997 SLT 301; [1997] BCC 77
Highland and Universal Properties Ltd v Safeway Properties Ltd 2000 SC 297; 2000 SLT 414; [2000] 3 EGLR 110
Hutcheson & Co's Administrator v Taylor's Exrx 1931 SC 484; 1931 SLT 356
Inversiones Frieira SL v Colyzeo Investors II LP [2012] EWHC 1450; [2012] Bus LR 1136
Knight v Goulandris [2018] EWCA Civ 237; [2018] 1 WLR 3345; [2018] 3 All ER 505; 181 Con LR 258; [2018] 1 P & CR 19
Mitchell v Glasgow City Council [2009] UKHL 11; 2009 SC (HL) 21; 2009 SLT 247; 2009 SCLR 270; 2009 Hous LR 2; [2009] 1 AC 874; [2009] 2 WLR 481; [2009] 3 All ER 205; [2009] PTSR 778; [2009] HLR 37; [2009] HRLR 18; [2009] PIQR P13
Sim v Howat [2012] CSOH 171; 2012 GWD 36-731
Worbey v Elliott [2014] CSOH 19; 2014 SCLR 573; 2014 GWD 7-137
Bennion, FAR, Statutory Interpretation: A code (8th Bailey and Norbury ed, LexisNexis, London, 2020), sec 9.6
Clark, FW, A Treatise on the Law of Partnership and Joint-stock Companies according to the Law of Scotland (T & T Clark, Edinburgh, 1866), vol I, p 182
Fleming Wallace, J, ‘Interpretation of Statutes, Deeds and Other Instruments’ in Stair Memorial Encyclopaedia: The Laws of Scotland (Butterworths/Law Society of Scotland, Edinburgh, 1991), vol 12, para 1160
Lindley, N, Partnership (19th Banks ed, Sweet and Maxwell, London, 2010), para 22.19
Macfadyen, DJD, et al, Court of Session Practice (Bloomsbury Professional, Haywards Heath, 2005), Div F7, Ch 21, paras 2052, 2061
Walker, DM, Law of Civil Remedies in Scotland (W Green, Edinburgh, 1974), pp 280–282, 304–306
Partnership — Action of count, reckoning and payment — Scottish limited patnership used as investment fund vehicle — Whether parties contracted out of duty to account — Partnership Act 1890 (53 & 54 Vict cap 39), sec 28 — Limited Partnerships Act 1907 (7 Edw 7 cap 24), sec 6(1)
Johann Maximilian Herberstein brought an action of count, reckoning and payment in the commercial court against TDR Capital General Partner II LLP and the general partners thereof. The cause called before the commercial judge (Lord Ericht) for debate on the defenders' motion to dismiss the action and the pursuer's motion to ordain the second, third and fourth defenders to lodge an accounting.
Section 28 of the Partnership Act 1890 (53 & 54 Vict cap 39) (‘the 1890 Act’) provides, “Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives.”
Section 6(1) of the Limited Partnerships Act 1907 (7 Edw 7 cap 24) (‘the 1907 Act’) provides, inter alia, “a limited partner may … at any time inspect the books of the firm and examine into the state and prospects of the partnership business”. Section 7 provides, “Subject to the provisions of this Act, the Partnership Act 1890, and the rules of equity and of common law applicable to partnerships, except so far as they are inconsistent with the express provisions of the last-mentioned Act, shall apply to limited partnerships.”
A limited partner in a limited partnership registered in Scotland under the 1907 Act and used as an investment fund vehicle brought an action of count, reckoning and payment against the limited partnership and its general partners. He sought count and reckoning by the general partners for their intromissions with the assets of the limited partnership in order that the true value of his interest in the limited partnership might be ascertained and the true balance of allocations and distributions due to him in terms of the limited partnership agreement might be ascertained and for payment of the balance due to him.
At debate, the defenders submitted that the action should be dismissed for want of relevant averments concerning the nature and scope of the obligation to account; that the pursuer's averments concerning the 1890 Act and the 1907 Act were irrelevant as the pursuer sought an accounting under the limited partnership agreement and not under either of those Acts; and, in any event, the limited partnership agreement made specific provision about the nature of the parties' rights and obligations in relation to documentation and information, which took priority to default statutory provision.
The pursuer submitted that it was not possible to contract out of the 1907 Act, sec 6(1), and the 1890 Act, sec 28; in any event, the provisions of the limited partnership agreement relied upon by the defenders imposed obligations to prepare and produce documents and did not deal with the underlying obligation to account for intromissions; and, as the defenders had admitted that they were under an obligation to account to the pursuer, they should be ordained to lodge an accounting.
Held that: (1) an action of count, reckoning and payment involved two stages: the purpose of the first stage was to ascertain whether the defender had an obligation to account to the pursuer; the purpose of the second stage was to ascertain what (if any) sum was due to the pursuer (para 27); (2) it was trite law that partners in a partnership, including a limited partnership, owed a duty to account to the other partners and, on a proper construction of the limited partnership agreement, the parties had not sought to contract out of that obligation (para 31); and an order ordaining the general partners to lodge an accounting granted.
Opinion reserved on whether it was ever competent to contract out of sec 28 of the 1890 Act or the common law obligation of a partner to account to the other partners (para 31).
Cunningham-Jardine v Cunningham-Jardine's Trs 1979 SLT 298 and Inversiones Frieira SL v Colyzeo Investors II LP[2012] Bus LR 1136distinguished.
At advising, on 18 June 2021—
Lord Ericht— [1] The pursuer is a limited partner in a limited partnership registered in Scotland under the Limited Partnerships Act 1907 (7 Edw 7 cap 24). The pursuer is concerned that he has not received all of the allocations and distributions that he is entitled to receive in terms of the limited partnership agreement, and that the value of his interest in the limited partnership has not been valued in accordance with the relevant provisions of the limited partnership agreement. He has brought an action of count, reckoning and payment against the limited partnership (the first defender) and the general partners (the second, third and fourth defenders). The pursuer seeks count and reckoning by the general partners for their intromissions with the assets of the limited partnership in order that the true value of the pursuer's interest in the limited partnership may be ascertained and the true balance of allocations and distributions due to the pursuer in terms of the limited partnership agreement may be ascertained and for payment of the balance due, and alternatively for payment of €2,756,693.
[2] The cause called before me for debate on the defenders' motion to dismiss the action and the pursuer's motion to ordain the second, third and fourth defenders to lodge an accounting.
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...at 21.02-21.11; the article by WJD (1950) 66 SLR 276 quoted therein and the summary as set out by Lord Ericht in Herberstein v TDR Capital 2021 CSOH 64 at paragraphs [26] and [27]. [5] The procedure has two stages. At the first stage the pursuer invites the court to order the defender to pr......