Dutia v Geldof & Ors

I have before me an appeal by Mr Dutia, the Claimant in this action, from a decision of Chief Master Marsh, contained in a lengthy reserved judgment which was handed down on 15 January 2015, in which he acceded to an application by the 1^st to 4^th Defendants for summary judgment to be given against Mr Dutia under CPR Part 24 on one claim brought in these proceedings.

That claim was that Mr Dutia, each of those four Defendants (Messrs Geldof, Florman, Pritchard and Moore), and a company called CLSA Ventures Ltd (“CLSA”) had agreed to carry on business in common with a view to profit and had thereby entered into a partnership governed by the Partnership Act 1890. I will refer to the Act as “the 1890 Act”, a partnership governed by the 1890 Act as an “1890 Act partnership”, and to Mr Dutia’s claim that he had entered into such a partnership as “the Partnership Claim”. CLSA was named as the 6^th defendant on the Claim Form, with an address in Hong Kong, but has never been served. In his Particulars of Claim, Mr Dutia asserted that the partners were, in default of anything else being agreed, entitled to share equally in the profits of the partnership; claimed that he had dissolved the partnership by service of the Particulars of Claim; and sought various relief in relation to the partnership, including an order that the other partners purchase his share in the partnership or alternatively that the partnership be wound up. This was not the only claim advanced by Mr Dutia in these proceedings, and the action will in any event continue in relation to the other claims.

By his Order dated 15 January 2015 the Chief Master gave summary judgment in favour of the 1^st to 4^th Defendants on the Partnership Claim, refused Mr Dutia permission to amend his Particulars of Claim (the amendments being intended to further particularise the Partnership Claim) and refused permission to appeal. Mr Dutia’s application for permission to appeal came before me and on 17 March 2015 I refused permission to appeal on the papers, saying that there was no reasonable prospect of success in overturning the Chief Master’s careful and comprehensive judgment. Mr Dutia renewed his application for permission orally, and that also came before me, on 2 June 2015, when I granted permission, not because I was persuaded that there was any apparent flaw in the Chief Master’s judgment but because I thought it possible that a judge looking at the case with rather more time than was available at the permission hearing might conclude that the Chief Master had conducted an impermissible mini-trial in rejecting Mr Dutia’s case on the facts. I added however:

I will say straightaway that in the event, having heard the appeal over 2 full days, I am entirely satisfied that the Chief Master was right to conclude that the Partnership Claim was unsustainable, and I propose to dismiss the appeal. In order to explain why, it is necessary to go through the relevant factual material in considerable detail: Mr King, who appeared for Mr Dutia under the Bar pro bono scheme, and to whom I am grateful for his careful and measured submissions, gave me a detailed account of the facts that could be marshalled in support of this aspect of Mr Dutia’s case, and in order to do justice to his submissions, I will have to examine the matters that he relied on. But I bear very clearly in mind that the purpose of this exercise is not to find the facts as one would do after a trial, but is the quite different one of ascertaining if the Partnership Claim raises a triable issue with a real prospect of success. If it does, the Court cannot grant summary judgment on the claim. But if, as in the result I conclude is the case, it can be seen at this stage that the claim has no real prospect of success, then it is well settled that the Court not only has power to grant summary judgment, but in general should exercise that power: see the well-known statements by Lord Woolf MR in Swain v Hillman [2001] 1 AER 91 at 94a-c that it is important that a judge in appropriate cases should make use of the powers contained in CPR Part 24, and that if a claimant has a case that is bound to fail, it is in truth in his interests (as well as the defendant’s) that he should know that as soon as possible.

As stated above, the claim is that an 1890 Act partnership came into existence between Mr Dutia, the first four Defendants and CLSA pursuant to s. 1(1) of the 1890 Act. This provides:

There is one other point worth noting at the outset, which is that an 1890 Act partnership requires an agreement that the putative partners should carry on business themselves. An agreement that they should merely have an economic interest in a business to be carried on by some other entity is plainly insufficient. Indeed s. 1(2) of the 1890 Act itself provides that the relation between the members of any company or association registered under the Companies Act or incorporated in pursuance of any other Act of Parliament is not a partnership within the meaning of the Act. This is no more than an application of the fundamental principle applicable to companies and other corporate bodies that the company or body corporate is a separate legal entity from its members, with the result that a business carried on by the corporate body is not carried on by its members.

With that brief introduction I can turn to the facts, so far as they appear at this stage. The claim is concerned with the establishment of a new private equity business, the aim being to create one or more investment funds for investing in businesses in Africa with the capital raised principally from outside investors. In due course, although not in fact until 2012, the first investment fund was established under the name “8 Miles Fund I”, the brand name “8 Miles” referring to the distance between Africa and Europe at their closest point; but Mr Dutia’s claim primarily relates to the period before that fund came into being, when the project (as I will refer to it) was getting off the ground.

He describes his background, before the events with which this case is concerned, as primarily being in African business rather than specifically in the private equity business; he says he has over 20 years’ experience of building and growing large businesses in emerging markets including Africa for blue chip companies, including Diageo and BP; and that since about 2007 he had been working on venture capital and private equity projects focussed on opportunities in Africa. As appears below, he was first introduced to the 8 Miles project in September 2008.

I was taken by Mr King through some 27 events in chronological order. I will deal with each of them in turn.

The first dates from before Mr Dutia’s involvement in the project. This is a presentation dated 30 July 2008. It was, according to Ms Coleman of Addleshaw Goddard, the Defendants’ solicitors, made by Mr Florman to Mr Geldof and Mr Pritchard. She explains that the initial plans for the 8 Miles project were developed following a keynote speech given by Mr Geldof at a conference called the CLSA Investors Forum in September 2007, which was attended by Mr Pritchard who was CEO of CLSA (UK); and that Mr Geldof spoke again at the CLSA Japan Forum in February 2008 at which CLSA agreed to provide seed capital for the project. Mr Pritchard did not himself have a background in private equity, so he commenced a search for a private equity specialist. That led to him being introduced to Mr Florman, who did have such a background, and to Mr Florman giving him and Mr Geldof the presentation on 30 July 2008.

This was at a very early stage in the project and indeed is described as “outline thoughts and progress” on the first slide. At the slide on page 3, headed “Structure”, is a diagram showing a proposed structure. At the top of the structure is a box containing “BG, MF +” which is a reference to Mr Geldof, Mr Florman and others. Below them is 8 Miles LLP, an English limited liability partnership (“LLP”, that is a body corporate formed under the Limited Liability Partnerships Act 2000), below that a box marked Manag.co.uk (FSA reg), and below that one marked GACP I (GACP referring to Geldof Africa Capital Partners, a brand name that was then suggested but which does not appear in the event to have been used). The diagram shows that GACP I was to be an English Limited Partnership (“LP”, not to be confused with an LLP, but a partnership formed under the Limited Partnerships Act 1907), which would invest in the underlying companies. This LP is also referred to as “the fund”. An LP allows persons to become partners in a partnership with limited liability, but it is a requirement that there be at least one general partner with unlimited liability (see s. 4(2)). In this structure outside investors contribute to the fund and become limited partners in GACP I, and the general partner of GACP I appears (although on this point the diagram is not as clear as it might be) to be another English LLP called GACP LLP; the general partner manages the fund and receives a drawing of 2% pa, but in fact delegates the management to Manag.co.uk and pays it a management fee. To one side is a Carried Interest Vehicle, a Guernsey LP, which receives “20% over 8% on each transaction”.

This structure accords reasonably well with Mr Dutia’s description of a typical private equity fund. His evidence is that such a fund will typically be structured as an LP (here GACP I), in which third party investors will be the limited partners and the general partner will be a vehicle of the investment professionals, the fund management services of the investment professionals being provided through the vehicle of an LLP. This LLP will (directly or through its subsidiary acting as the general partner of the LP fund structure) be entitled to charge management fees to the fund, and that is the primary source of its revenues, but also be able to charge other fees, for example for introducing other investors. An investment professional becoming involved in a project to create a new private equity firm would therefore anticipate having a share in the profits of the management vehicle LLP, those profits arising principally from the management charges which the LLP or its vehicle would be entitled to levy on the funds under its management.

In addition, he says, the investment professional would anticipate two other sources of potential profit. One is “carried interest” (or “carry”); this is a share in the profits of the fund, payable to the investment professionals after the investors have received a predetermined return on their investment (the “hurdle rate”) and designed to align their interests with those of the investors, this entitlement being structured through a separate carried interest vehicle, typically an LP. It is represented in the presentation by the “20% over 8%”, that is 20% of any profits made on each transaction over and above the first 8%, which is the hurdle rate. The other potential source of profit is the benefit of potential further co-investment in the funds by the investment professionals, either individually or through a collective vehicle. In short, says Mr Dutia, the principle is that the investment professionals will have a significant stake in the profits of the investment.

Mr King submitted to me that this document was supportive of Mr Dutia’s case, as it suggested that there would be a partnership sitting above the entity registered with the FSA. He said that what was important was the agreement between the people at the top.

I agree that this structure suggests that the people at the top (here represented by the box marked “BG, MF +”) would agree to form the structure underneath, and would be the ultimate owners of the structure. A later slide, on page 21, headed “Founder Partners”, shows 3 partners or members in 8 Miles LLP, here identified as BG, MF and PP (ie Mr Pritchard). In order to become members of the LLP in this way, the individuals would obviously have to agree to do so. But I do not find in this presentation anything which suggests that these 3 founder partners (or any other individuals) were, or would be, agreeing to carry on business on their own account. Indeed the same page shows that the LLP would be bearing establishment costs, such as fees, rent, services and travel costs, and would form the management company. From August it was assumed that the costs would be running at about £200,000 per month. There is nothing to suggest that costs of this order would be funded by the founder partners themselves – all that they are shown as contributing is a fairly nominal contribution of capital (“say $1000”) to the LP; instead the costs are shown as funded by a facility to be provided by CLSA under which it would agree to inject $2-10m in a drawdown facility. That facility is shown as being provided to the LLP, not to the individual partners. The same slide also shows that it was envisaged that from August “BG, MF, PP” would “work for the business”.

I do not see here any support for the suggestion that the founder partners would carry on business themselves; what is suggested is that the individuals would own the LLP; that the LLP would bear the costs of establishing the business; and that the money required to meet those costs would be made available by CLSA to the LLP. It seems to me an inescapable inference that what was then envisaged is that the LLP would be carrying on the business of establishing the fund, and that the founder partners would work for that business carried on by the LLP, not for themselves. An LLP is a body corporate, with legal personality separate from that of its members, which is formed by being incorporated under the Limited Liability Partnerships Act 2000 (see s. 1(2)), and, as such, a business carried on by an LLP is, on the general principles referred to above, not being carried on by its members. The founder members would own the LLP that carried on the business, and would work for the business, but would not, at any rate so far as this presentation suggests, be carrying on the business themselves.

The same picture emerges from the next slide, page 22, where under the heading “Money Flows” there is another structural diagram, this time showing a “Start up & holding vehicle”, with the Founders holding equity in the vehicle (and making a “GP commitment (nominal $)”), and the vehicle being funded by debt in the form of a borrowing facility. Below that vehicle is Management Co LLP, the general partner; and below that is GACP I, the fund. On the next slide, page 23, under “Next Steps” are included “1. Form LLP – working and holding vehicle” and “6. LLP contract with MF.” An earlier slide, page 19, under “MF” shows that it was envisaged that he would resign from his current position at “DH” (that is, Doughty Hanson), lead and create GACP and manage it for 7-10 years, recruit the whole firm, raise $2.5bn for the fund and would receive “Compensation from working vehicle”, with “Market terms re. salaries etc. later from the fund.” Reading the slides together, it seems evident that the “Start up & holding vehicle” on page 22 and the “working vehicle” referred to on page 23 are both the same as 8 Miles LLP referred to on page 21.

None of this suggests that Mr Florman was envisaging working for his own account; instead what it suggests is that 8 Miles LLP would be formed as the working vehicle, that he would enter into a contract with it, and would receive compensation from it, with the prospect of receiving a larger salary in line with market rates from the fund when it was up and running.

The Chief Master’s comment on this presentation (at [50] of his judgment) was:

As mentioned above, the presentation included a reference to Mr Florman recruiting the whole firm, and on another slide on page 16, under the heading Recruitment, there is a reference to a “Need to begin work on finding the best infrastructure team – say 5 or 6 individuals” and that a “pipeline of opportunities must also be developed with this team”.

Mr Dutia was put in touch with Mr Florman and had an initial meeting with him on 23 September 2008. Mr Dutia’s evidence is that Mr Florman told him he was intending to leave Doughty Hanson to form what would be a very large African fund, and that he (Mr Dutia) expressed interest in getting involved in such a venture. Mr King relied on this as showing that Mr Dutia was involved from the outset or nearly the outset of the project. It might be slightly more accurate to say that he had shown an interest at a relatively early stage than that he was involved, but nothing turns on this.

On 26 September 2008 Mr Gander of Clifford Chance wrote to Mr Florman under the title “Project New Fund” with an estimate of fees for various phases of proposed work to be carried out in connection with the establishment of the fund. Attached was another structure diagram, headed “Proposed Vanilla Fund”. This shows at the top “Execs”, and below them an LLP (“UK Manager LLP”); a note shows that the LLP would manage the Fund, and the Executives would be members of the LLP. The LLP is shown as holding 100% of “UK GP Ltd”, with notes explaining that as this company would have unlimited liability (as General Partner of the Fund, structured as an LP), it was recommended that it be separate from the Manager (that is, the LLP), but would delegate management responsibility to the Manager for which it would pay a Management fee. This fee would be derived from a 2% annual drawing from the fund which the General Partner would receive as a priority profit share. Below this is the Fund, structured as an English LP with UK GP Ltd as General Partner and investors as Limited Partners; below the fund is a Holdco, and below that are various Assets. To one side is a Scottish Limited Partnership (“SLP”) which receives carried interest of 20%, the Executives being limited partners in the SLP. Save for the substitution of an SLP for the Guernsey LP as the carried interest vehicle, and the simplification of what had apparently been three entities to manage and be general partner of the fund (8 Miles LLP, Manage.co.uk and GACP LLP) into just two (the LLP as manager and UK GP Ltd as general partner), this structure is markedly similar to that shown in Mr Florman’s presentation.

Mr King drew my attention to the fact that a note refers to the 20% profit share being “payable to the team as a carried interest”. I agree that this shows that what was envisaged is that the team, or the Executives as they are called, should both own the LLP which would actually manage the Fund (and be paid a management fee by the general partner, derived from a 2% priority profit share), and have a separate interest in the carried interest vehicle; but I do not see that this document, any more than Mr Florman’s presentation, suggests that the Executives will in any relevant sense be carrying on business themselves. Indeed Mr Gander’s fee proposal refers, under Phase 1 of the proposed work, to the establishment of the LLP to act as the manager of the Fund, and to Clifford Chance advising on, and documenting, the rights and responsibilities of the management team who would become the members of the LLP. That suggests that the individuals who made up the management team would not be working for themselves but for the LLP. The fact that they would also have a separate interest in the carried interest vehicle illustrates how it was envisaged that they would be (in part) rewarded, but the carried interest vehicle is just a recipient of profits – it is not suggested that it would be carrying on any business itself.

Following his initial meeting on 23 September 2008, Mr Dutia was contacted by Ms Cathy Bain of the recruitment firm Stonehaven, and had an introductory meeting with her on 30 October 2008. She arranged for him to meet Mr Pritchard, whom she described in an e-mail of 7 November 2008 as “currently the CEO of CLSA UK (the fund’s sponsor)”, who had been “spearheading the creation of the fund.” Mr Dutia duly held a meeting with Mr Pritchard on 13 November 2008. His evidence is that he described his experience and how this would help build an African fund distinct from the infrastructure fund that Mr Pritchard described they were focussed on initially. Mr King referred to this as an example of Mr Dutia’s contribution to the project.

On 12 January 2009 an LLP was incorporated under the name ACP Capital Management LLP (later, on 21 April 2009, changing its name to 8 Miles LLP). The only members at the outset were Mr Pritchard and a company called Meckers Ltd, which (according to Ms Coleman) was a company associated with Mr Geldof. In the event Meckers Ltd only remained a member until 30 April 2009 when another company, Africa Research UK Services Ltd, became a member: Mr Dutia’s evidence is that this was a wholly-owned subsidiary of the LLP chosen to fulfil the role of general partner of the fund. In effect therefore, Mr Dutia says, the entire economic interest in the LLP was held by Mr Pritchard from 30 April 2009, and this remained the case until 30 September 2009 when CLSA became a member; Mr Florman (and Mr Moore) did not become members until 1 March 2010; and Mr Geldof not until 3 September 2010.

Also in January 2009 Mr Florman entered into a consultancy agreement with the LLP under which he was to be paid £150,000 a year for providing consultancy services to the LLP, the services being described as:

Mr King suggested that there were good grounds for thinking that this did not reflect the reality of the situation. In his presentation in July 2008, Mr Florman had referred to a loss of c. €4m on his resignation from Doughty Hanson and the need to convince his wife and children; and Mr King suggested that he would scarcely have given this up for the benefit of working, for an annual consultancy fee of £150,000 pa, for an LLP in which he had no interest. In a similar vein he pointed out that Mr Moore did not enter into a consultancy agreement until 1 April 2009; if he was working on the project before April 2009 (something which would only become apparent on disclosure), he was not at that stage working under a consultancy agreement with the LLP; Mr King suggested the likelihood is that Mr Moore, and indeed Mr Florman, were working because they expected to become members of the LLP.

A similar point was made by Mr Dutia in his witness statement where he took issue with the assertion by Ms Coleman that “from 12 January 2009” (ie when the LLP was established) “the 1^st to 4^th Defendants undertook work for the LLP rather than for any other person or partnership”. Mr Dutia suggested that in the light of the contents of both Mr Florman’s presentation and Mr Gander’s advice, it was to be inferred that it was intended from an early stage that the ownership of the LLP was ultimately to be shared between the joint venturers for their own personal profit, and that:

This I think rather exposes the fallacy in Mr Dutia’s case. I agree that it is a reasonable inference that it was intended from an early stage that Mr Geldof and Mr Florman would become members of the LLP as well as Mr Pritchard – this is what both Mr Florman’s presentation and Mr Gander’s fee proposal plainly envisage. I also agree that it is reasonable to suppose that Mr Florman would not have been willing to give up a potential €4m merely for the sake of working for someone else’s LLP for £150,000 pa. It is a fair inference that he only did so because he expected in due course to become a member of the LLP and thereby share in the profits from the management fee, and to enjoy other substantial financial rewards, such as a market-level salary from the fund once it was up and running, and an interest in the carry. And no doubt if Mr Moore did start working on the project before April 2009, he too was working in the hope or expectation of owning in due course a stake in the venture.

It is less clear, on the documents before the Court, whether the arrangements between Mr Geldof, Mr Pritchard and Mr Florman (and in due course Mr Moore) were contractually binding so that if necessary the others could require Mr Pritchard to admit them to the LLP, or whether they were informal and non-binding arrangements under which they merely trusted him to do so. But even assuming that there was an enforceable contract between them to that effect, it does not seem to me that anything has been pointed to which suggests that this was more than an agreement, as Mr Dutia puts it himself, as to their having an ownership stake in the venture by becoming members of the LLP (and no doubt also owners or members of the separate carried interest vehicle). No doubt also that ownership was with a view to them personally benefiting from the profits of the business. But I do not see that anything in this begins to suggest that what was envisaged or agreed is that the individuals should carry on business together. What it suggests is that (at most) they agreed that they should together own an entity which would carry on a business. As I have already pointed out, that is not an agreement that by itself gives rise to the relation of partnership, because s. 1(1) of the 1890 Act requires the partners to be “carrying on a business in common”, and having an ownership stake in an entity that carries on a business is not the same as carrying on a business oneself.

To anticipate, this same fallacy underlies the entirety of Mr Dutia’s Partnership Claim: however much it was agreed that he should become involved in the project, and however much it was agreed that he would have an equal stake to the others (something that is in dispute), and however much this was with a view to him and the others making large personal gains from the venture, nothing begins to establish that what was intended, let alone agreed, was that the means by which they would reap such rewards would be by carrying on business themselves rather than by having an ownership stake in the vehicles through which the business was to be carried on and the profits delivered to them.

So although Mr King submitted that the assertion that none of the 1^st to 4^th Defendants agreed to become partners raised a triable issue that was not suitable for summary judgment, I do not see in any of the facts here relied on any realistic prospect of establishing that they did so agree.

Mr Dutia had a second meeting with Mr Florman on 5 February 2009, again organised by Ms Bain. According to Mr Dutia, at this meeting Mr Florman told him more about the status of the fund, and Mr Dutia reiterated that he was keen to be involved. According to a note made by Ms Bain in a “Correspondence Log” relating to Mr Dutia (presumably based on a report from Mr Florman), it was a positive meeting, at which Mr Dutia said he would be working for Diageo until April and “after that will discuss whether can help with the fund set up”.

Mr King referred me to Further Information provided by Mr Dutia (and supported by a statement of truth given by him) where in relation to this meeting it is pleaded that Mr Florman had told him of his intention to create a long-term partnership to manage several funds that was profitable for its partners, and more specifically that he and Mr Geldof sought to create a partnership in which they, along with the other partners brought in to build the business, would each have a share of carried interest and a share of the venture’s profits, this being intended to serve the purpose of uniting the objectives of partners and investors. Mr King, while accepting that the Chief Master referred to this part of the Further Information, made the point that he did not also advert to a later paragraph where Mr Dutia said in relation to the same meeting that although he was interested in being part of the “founding team to establish the venture”, he was not interested in an advisory role.

This is true, but I do not see it as significant. The Chief Master elsewhere in his judgment (at [70]) makes the point that the use of the words “partner” or “partnership” has little value when seeking to determine whether an 1890 Act partnership has come into being as the label used by the parties does not signify that the requirements of the Act have been complied with; and specifically that in the context of an LLP, “partner” is commonly used to mean “member”. So even accepting the pleaded case that Mr Dutia made it clear that he wanted to be part of the founding team, and that Mr Florman referred to his and Mr Geldof’s desire to create a partnership in which the partners brought in to build the business would each have a share of carried interest and a share of the venture’s profits, this does not take one very far.

I have already referred to this.

Mr Moore was the last of the four individual defendants to join the project; he also had experience in private equity. As referred to above (paragraph 27), on 1 April 2009 he entered into a consultancy agreement (in the name of GJ Moore Consultancy) with the LLP (in the name of 8 Miles LLP, although the change of name had not in fact then formally taken place). Under the consultancy agreement he was to be paid £4,200 per month in return for providing services, specified as follows:

In a letter dated 29 April 2009 Mr Pritchard wrote to Mr Moore with a non-disclosure agreement (“NDA”) which Mr Moore signed and dated 18 May 2009. The letter began:

Mr King pointed to the fact that the NDA was not entered into with 8 Miles LLP, and that it looks as if Mr Pritchard was in this instance not acting on behalf of the LLP but on behalf of his co-venturers. The Chief Master acknowledged in his judgment (at [55]) that there was no reason to believe that the mismatch between the parties to the consultancy agreement (made with the LLP) and the NDA was anything other than intentional; and referred (at [54]) to counsel then appearing for Mr Dutia (Mr Mather) having pointed to the wording of the NDA as a clear indication that work was being undertaken in establishing the fund outside the scope of the LLP.

It is a fair point that it is curious that the NDA refers to Mr Pritchard, his colleagues and associates, and apparently does not refer to the LLP at all. The Chief Master commented, and I see no reason to disagree, that it was far from clear whether the NDA would have been enforceable by the LLP had the point arisen. I accept that it indicates that Mr Pritchard saw himself and his colleagues as engaged on a project of establishing the fund, and as having themselves received advice in that capacity. But I do not see that this was anything other than an accurate reflection of the fact that the individuals (Messrs Geldof, Pritchard and Florman) had indeed embarked on a project to establish the fund. That project involved taking advice on an appropriate structure (necessarily given in the first instance to one or more of the individuals as the LLP had not yet been formed – Mr Gander’s initial fee proposal was in fact addressed to Mr Florman), and putting in place the various components of the structure as advised. None of this however seems to me to suggest that what the individuals were embarked on was the establishment of a business to be carried on by them individually. Work done by individuals to establish a corporate body to carry on a business cannot simply be treated as the equivalent of the carrying on of a business by the individuals themselves.

In his Further Information, Mr Dutia says that he had a telephone conversation with Ms Bain on 26 May 2009 in which she reported that Mr Moore had joined and would be leading the recruitment of the team who would be building the venture together with Messrs Florman, Geldof and Pritchard, to which Mr Dutia said words to the effect of “What about the role? I am only interested in joining as a partner.” Ms Bain’s correspondence log confirms that she spoke to him, discussed Mr Moore’s involvement, agreed to send Mr Dutia the NDA, and set up a meeting for Mr Dutia with Mr Moore for 28 May 2009.

Mr Dutia duly met Mr Moore on 28 May 2009. At the meeting he signed an NDA, which was in the same form as that signed by Mr Moore, namely a letter, in this case dated 25 May 2009, addressed to him by Mr Pritchard, again on behalf of himself, his colleagues and associates, and their respective advisors; as with Mr Moore’s it made no reference to the LLP. Mr King relied on this but I have already in effect considered the relevant points when considering Mr Moore’s NDA.

In Mr Dutia’s Further Information he says that at the meeting he told Mr Moore of his interest in getting involved as a partner, which was followed by a lengthy discussion about the nature of the commitment required from a partner. Mr King said that this gave rise to a real cross-examination point about what was meant by being a partner – did it refer to being a partner then, or in the future, or what? I do not think this is right: there is no question (and it is not in fact part of Mr Dutia’s pleaded case) that he was being offered anything specific at that stage. In fact Ms Bain’s correspondence log contains a lengthy entry in relation to this meeting, recording that Mr Moore spent 2¼ hours with Mr Dutia, that Mr Moore believed that he was a very serious candidate for one of their “industry investment professionals”; that he would get Mr Moore’s vote; and that in Mr Moore’s model of an investment team populated by a significant number of “real operators”, he would fit the bill very nicely, the only concern being whether he would be in for the long haul. This all confirms that Mr Moore, who was charged with having a special focus on hiring the industry investment professionals for the project, saw Mr Dutia as a strong candidate for this role.

Ms Bain’s note ends:

Mr King referred to the comment the Chief Master made in his judgment a propos of the last sentence of Ms Bain’s note, which was (at [56]) that Mr Dutia’s answer was that something more than the consultancy agreement which he was later offered was required; and said that this was a fact-sensitive question which needed to be determined at trial, Mr Dutia’s case being that he made it clear that he wanted to be a “partner”. It seems to me that this can only be answered by looking at what he was in the event offered, as to which see below.

Interestingly, a reference to locking in potential recruits is found in a document headed “Project Latin – Investment professionals – Agenda” dated 3 June 2009. After referring to various matters, including “Team structure”, “Compensation” (“one package for each tier”) and “Implications for people currently under consideration” (where Mr Dutia is listed as the second of more than a dozen), this refers to “Procedure to “lock-in” the people that we want”, broken down into (i) an intense front-end loaded process to determine suitability, including a “hard-nosed track record examination”; (ii) a slower process, including a meeting with BG (Mr Geldof) and the “presentation and negotiation of package and contract (escrowed)”; and (iii) trying to get them to engage in pre-close activity (“pipeline development”). This suggests that it is simplistic to regard the process of locking in suitable candidates as simply consisting of the consultancy agreement; it was designed as a process with a number of parts, including the presentation and negotiation of a formal contract. As will be seen, the process in fact followed with Mr Dutia followed this suggested procedure quite closely.

One of the suggested items on the agenda for investment professionals was a track record meeting. Ms Bain set up such a meeting for Mr Dutia with Mr Moore and Mr Florman for 13 July 2009, describing it in her e-mail to them as “Miten Dutia Track Record Review meeting”, at which Mr Dutia was due to make a presentation.

Mr Dutia in his Further Information says various things about this meeting: he says that Mr Moore told him (after Mr Florman had left, as he recalls) that the rewards of the venture to the partners, which would include Mr Dutia, were drawings, carried interest and a share of profits; altogether these would be very substantial (although they would depend on the size and success of the funds). He says that Mr Florman spoke of the need to create a strong partnership so as to build the business together; and that after Mr Florman had left, Mr Moore said that there would be a consensual culture among the senior team of partners, which Mr Dutia would be an equal part of, the aim being to create a strong partnership where all partners were equal, and that he was keen that Mr Dutia join the venture as soon as possible to work alongside Messrs Florman, Geldof and Pritchard and himself. He says that there was a detailed discussion about rewards and remuneration and that he sought reassurance that it was worth his while to pursue the discussions, to which Mr Moore used words to the effect that the rewards of being a partner depended on the profits of the venture and the value created by the fund, but that these should be very substantial and “I do not think you will be disappointed”.

If Mr Dutia’s recollection of the meeting is accurate, this is clearly material from which it could be inferred that what was being held out to him was the prospect of joining the project as a senior member of the team with equal status to, and working alongside, the existing four individuals, and that there was a potential for substantial rewards from drawings, profits and carried interest; and that the team was described as a “partnership”. Mr King accepted that there had to be a stage at which Mr Dutia said “I’m in”, and that that stage had not yet been reached, but submitted that this gave rise to a triable issue as to what status Mr Dutia would have when he did say “I’m in”, and that it was not fanciful to suppose that when he did so, he would do so as a partner.

It is wrong though to seize on the words “partnership” and “partner” which Mr Dutia recalls being used at this meeting as if they help to resolve the issues. I have already referred to the point made by the Chief Master that use of these words has little value in determining whether an 1890 Act partnership has come into being, especially where there is an LLP of which individuals are expected to become members as the members of an LLP are very commonly referred to as partners. The fact that what was, according to Mr Dutia, being held out to him was equal status to the others in a strong partnership, is not to my mind of any significant assistance on the real question, which is whether what was envisaged and offered to him and agreed was that he would be a member of a team running a business themselves, or a member of a team running the business through an LLP in which they would have an ownership stake. All the available material up to this point, including in particular Mr Florman’s presentation and Mr Gander’s advice, was premised on the basis that the structure would be the latter; and there is nothing in Mr Dutia’s account of this meeting in his Further Information which suggests anything different.

Mr Moore sent an e-mail to Ms Bain on 23 July 2009; Mr Dutia was then on holiday. Mr Moore said, referring to Mr Dutia, that:

Mr King submitted that this gave rise to questions that could be elucidated in cross-examination: what was the nature of the wider, long-term package? I accept (as I think the Chief Master did at [58] of his judgment), that this indicates that the consultancy agreement was only part of the arrangements envisaged, but the e-mail also seems to me to indicate that although Mr Moore anticipated that a wider package would be developed and put to Mr Dutia, it was not then ready and would not be for a while.

Mr Moore and Mr Dutia spoke on the telephone on 5 August 2009. Mr Dutia pleads in his Further Information that in that conversation Mr Moore urged Mr Dutia to start working on a consultancy basis, pending the finalisation of partnership documents which were under development, in order to help build the venture; and that if Mr Dutia did so, he, Mr Florman and Mr Moore would all be in the same boat. Mr Dutia also says that Mr Moore explained that he and Mr Florman were currently helping to build the venture on a consultancy basis whilst partnership documentation was being developed; and that he stated his willingness to participate on the basis of being an equal partner to Mr Florman and Mr Moore in the venture.

Mr King drew attention in particular to Mr Dutia’s agreement to join the venture on the basis of being an equal partner; as before, this is evidence that what was being held out to Mr Dutia may have been an equal status and position in the structure for the venture to Mr Moore and Mr Florman; but it does not seem to me to advance the case that what was envisaged (on either side) was an 1890 Act partnership in which the individuals would be carrying on business themselves.

On 7 August 2009, Mr Moore e-mailed Mr Dutia a consultancy agreement for him to review. The agreement provided for Mr Dutia to be paid £2,500 per month, and in the e-mail Mr Moore said:

In draft Amended Particulars of Claim, Mr Dutia pleaded that he had a conversation with Mr Moore, after receiving the e-mail of 7 August 2009 and before signing the consultancy agreement on 17 August 2009, in which Mr Moore told him that he (Mr Moore) and Mr Florman were being paid in the meantime as consultants while the legal documents were being developed, but that it was clear they were all partners on a consensual basis; Mr Dutia replied that he was happy as long as all the partners were equal and the process was consensual, to which (according to Mr Dutia’s Further Information) Mr Moore did not demur but continued to give assurances that this was the basis on which the other partners were working, and to encourage Mr Dutia to start work.

I accept that this is evidence which, if accepted, indicates that Mr Moore encouraged Mr Dutia to start work under the consultancy agreement by assurances that he would be an equal partner to the others. But there are two points I would add to that. First, Mr Moore on this account was telling Mr Dutia that legal documents were being developed. The obvious message that this conveys is that the precise nature of the offer that was being made to him (including no doubt the detail of the “package post first close”, that is after the first fund had been fully established, promised in Mr Moore’s e-mail of 7 August) would be found in the legal documents which had not yet been finalised. It does not seem realistic in these circumstances to suppose that Mr Moore was offering, or Mr Dutia accepting, an entirely unspecific and informal partnership pending finalisation and agreement of the legal documents. On the contrary, Mr Moore had just sent Mr Dutia the consultancy agreement, and was, according to Mr Dutia, seeking to encourage him to start work, and the natural interpretation of that is that Mr Moore was trying to persuade him to start work on the terms of the consultancy agreement (as he and Mr Florman were doing) pending finalisation of the more long-term package.

Second, to repeat a point already made, an assurance that Mr Dutia would be an equal “partner” is of little assistance in deciding whether an 1890 Act partnership came into being, which requires that the parties agreed that they should carry on business together themselves; indeed in the context of Mr Moore seeking to persuade Mr Dutia to sign up to and work under a consultancy agreement which provided (see below) that he would provide services to the LLP, it seems wholly fanciful to think that this was what was being suggested to Mr Dutia. Even on Mr Dutia’s account, the encouragement to believe that he would be an equal partner takes one no further than that he would have an equal stake in the venture. The precise nature of that stake would become clear on finalisation of the legal documents, but the indications were that it would be a stake in a structure where the business would be carried on by the LLP.

On 17 August 2009 Mr Dutia signed the consultancy agreement (and also another version of the NDA, which did not differ materially from the NDA he had already signed). The consultancy agreement was made between 8 Miles LLP (referred to as “8 Miles”) and Mr Dutia. It recites in an Introduction that:

The agreement provided for Mr Dutia to provide the Services, which were defined as follows:

Assisting 8 Miles with the fund raising process including drafting elements of the Private Placement Memorandum that will be issued in due course (in particular with regard to the description of the operational improvement programmes that the investee companies will adopt); and

Participating in and co-ordinating meetings with potential investors.”

The Chief Master in his judgment (at [60]-[62]) commented that the consultancy agreement was plainly an important document, that it “looks like an interim measure pending an offer to join the LLP, but plainly the LLP was intended to have a central role in setting up the Fund” and that Mr Dutia clearly knew of the existence of the LLP by the time he received the draft in early August. I agree, in particular that it is clear that the fund was being described as being raised by 8 Miles. Mr King’s submission was that the consultancy agreement governed the work that Mr Dutia did before he started working full-time, but that a partnership arose when he started working full-time (see below).

In his Further Information, Mr Dutia refers to two telephone conversations which he had on 18 August 2009. The first was with Mr Florman who contacted him and told him that the partnership terms were ready, that he hoped Mr Dutia would find them attractive, and that Ms Bain would contact him to go through them.

The second was with Ms Bain and Mr Simon Hall, also of Stonehaven, and is supported by a manuscript note made by Mr Dutia. This indicates that they told him that a formal offer would be made to him in September, and gave him some idea of the rewards, consisting of a base amount (according to the note “$250k+ – could be significantly higher”), with 2 other parts, a profit distribution of the management fee, and the carry, for which there was not a formula yet. The note describes his position as “one of the most senior professionals”, that there would be 8-10 people at the top table (“immediately 3 + 2-3 + junior team members”), that there would be joint decision making, and that he would be an equal membership of the leadership team. It also makes specific reference to partners sharing responsibility, risk and rewards in a collaborative fashion; there is also reference to “all same” which in the note looks as if it may refer specifically to the base amount, but Mr Dutia’s pleaded case is that he was told that he would be a partner alongside Messrs Florman Pritchard and Moore (presumably the first 3 at the top table), with all the rewards the same.

On 21 August 2009 Mr Dutia sent Mr Moore an e-mail in which he referred to the telephone call from Ms Bain and Mr Hall as follows:

This e-mail suggests that Mr Dutia saw the reference to “partner” at the time as a reference to his status, rather than a statement that he would be joining an 1890 Act partnership. It also suggests that he thought the founding partners might have special terms; and that he understood that there would be a draft contract which was not yet ready.

Mr Dutia’s evidence in his witness statement is that almost as soon as the consultancy agreement had been signed he began working full-time, or very nearly full-time, on all aspects of the project, including in particular setting up the fund, attracting investors to the fund and identifying investment opportunities for the fund; and that this was done as a result of active encouragement from Messrs Florman, Moore and Pritchard. The Chief Master’s comment on this in his judgment (at [63]) was that although Mr Dutia’s assertion was accepted for the purposes of the Part 24 application, he noted that there was nothing in any of the e-mails passing between the parties which records either encouragement from any of the Defendants or that the consultancy agreement had ceased to reflect the true position very soon after it was signed. He also concluded (at [93]) that:

In his Further Information, Mr Dutia says that from early September 2009, Mr Moore also tried to persuade him not to pursue opportunities outside the venture and to contribute his projects to the deal pipeline, in return for assurances as to his stake in the venture or if he chose not to participate a “back-up transaction fee”, the gist of the words used by Mr Moore being that all the partners were working together equally to build something special and all taking risks to share in the rewards. He also says that at around this time he protested that the amount of work required from him far exceeded what was contemplated by the Consultancy Agreement; at which Messrs Florman, Moore and Pritchard assured him that each of them was taking a risk to share in the rewards.

On 1 September 2009 Mr Dutia e-mailed Mr Moore asking if they were due to have a telecon on “dealflow” the next day. On 2 September Mr Moore e-mailed Mr Dutia saying:

Mr Dutia’s assertions in his Further Information, if established, tend to show that he was being encouraged to contribute projects to the “pipeline”, and to work for more hours than he was obliged to under the consultancy agreement, by the prospect of having an equal stake in the project; but the reference to a back-up transaction fee and this exchange of e-mails to my mind make it very clear that both Mr Dutia and Mr Moore were proceeding on the basis that at that stage Mr Dutia had not joined, and was not finally committed to joining, the project. The whole concept of a back-up transaction fee was to compensate Mr Dutia for bringing a transaction to the project in the event that he did not join it. This seems to me plainly inconsistent with any suggestion that either Mr Dutia on the one hand or Mr Moore (and Mr Florman and Mr Pritchard) on the other thought that all of them had already agreed to work together in such a way as to give rise to an 1890 Act partnership, quite apart from the point that Mr Moore’s e-mail of 6 September illustrates that what was contemplated (to the knowledge of Mr Dutia) was that he would join 8 Miles LLP. The Chief Master said (at [95] of his judgment) that he found this discussion

On 18 September 2009 Mr Dutia was sent a package which consisted of a one-page covering letter from Mr Geldof, a 4-page letter from Mr Pritchard and a number of attached documents. Mr Geldof’s letter was written on paper headed 8 Miles LLP, and after describing some of his background and his realisation that what Africa needs most is businesses, continues:

Mr Pritchard in his letter, also written on notepaper headed 8 Miles LLP, and signed by him on behalf of 8 Miles LLP, said:

All the attached documents were headed 8 Miles LLP on each page. The first (called “Long-term arrangements, interpretation of compensation for Partners, Private Equity”) gave details of the proposed distribution of profits. This distinguished between Partners who would receive 5 units each, and the Group of Senior Partners who would receive 37.5 units between them. In arriving at the distributable profits, various deductions would be made including a profit participation for CLSA. Illustrative projections of the carried interest showed that if the fund was $1,000m and doubled in size, the carry pot would be $200m, and a partner’s 5% share $10m. A second document dealing with the proposed carried interest structure contained a structure diagram very similar to that attached to Mr Gander’s fee proposal, with the principals being members of 8 Miles LLP as manager of the Fund, the Fund consisting of one or more English LPs (a subsidiary of 8 Miles LLP, namely 8 Miles GP Ltd, acting as general partner of the LPs), the LPs holding Holdco(s) which in turn would hold Investments; and with a separate carried interest vehicle in the form of a Guernsey LP, the limited partners being the Principals, management team and CLSA. Another document dealing with the organisational structure of the Firm set out elaborate proposals for a management structure under which the founding or Senior Partners would manage the business through a series of committees; one of these was the Investment Committee, which would initially consist of Mr Florman and Mr Moore but to which all of the Partners would subsequently be added.

The Chief Master commented in his judgment (at [70]) that it was plain that the expression “partner” (extensively used in this collection of documents) referred to Mr Dutia becoming a member of the LLP. This may not be entirely accurate as it may have been that “partner” was actually being used not in the technical sense of a member of the LLP, but as denoting a particular status of senior employee, albeit rewarded by a share of profits. But the Chief Master was clearly right that the use of the word partner has little or no value in determining whether an 1890 Act partnership has come into being. He also commented (at [68]) that considerable caution needed to be exercised before picking out certain aspects of Mr Geldof’s letter as providing support for an 1890 Act partnership when the express purpose of the letter and the extensive documents it enclosed was to offer membership of the LLP. Later (at [96]) he said:

I agree. It is perfectly plain that what Mr Dutia was being offered at this stage was the opportunity to join an LLP in which the other principals would also be participating; that the LLP would carry on the business of managing the fund(s), the principals serving on committees of the LLP for this purpose; and that the profits of the business would be distributed to the principals by the LLP in accordance with the units to be issued to them (and as limited partners in the separate carried interest vehicle). This is wholly inconsistent with any offer to Mr Dutia to participate in a business to be run by himself and the other principals directly, the profits to be shared equally. If no 1890 Act partnership had already come into existence, I struggle to see how, in the light of the terms of this letter, it can be supposed that one thereafter came into being when its effect would be so radically different from what was here being held out to him, unless at any rate there was some communication which made it clear that there had been such a change.

In his Further Information, Mr Dutia pleads that between 20 September and 1 October 2009 he had several conversations with Mr Florman about the documents that had been issued to him. Mr Dutia says he objected that the draft documentation did not give him equal status and appeared to give him a lesser economic stake and a smaller share of carried interest than the other senior partners; and that Mr Florman assured him that he was “in the same boat” as Messrs Pritchard, Moore and Florman, that he was equal to them in a “totally flat” partnership, that the draft documentation shown to him was an early draft, that it had been constructed to obscure the amounts demanded by Mr Geldof, and that Mr Dutia, as one of the first partners, would need to agree and finalise the partnership deed.

This evidence, if accepted, would support a case that what Mr Florman was assuring Mr Dutia was that the final form of documentation would provide for him to have equality with at any rate himself and Messrs Pritchard and Moore (although it is rather more doubtful whether he gave the same assurance in relation to Mr Geldof). But it does not seem to me to support any case that what was here being held out to Mr Dutia was anything other than an opportunity to join the LLP; Mr Florman’s assurances, as described by Mr Dutia, were assurances as to what the partnership documentation would provide, and that documentation would set out the terms on which he would join the LLP.

On 1 October 2009 Mr Dutia sent an e-mail to Messrs Moore, Pritchard and Florman saying:

In relation to the final point, the starting date, he wrote:

Also on 1 October 2009 and following Mr Dutia’s e-mail there was, according to Ms Coleman, a telephone conversation between Mr Dutia and Ms Bain and Mr Hall of Stonehaven. According to her, Stonehaven made it clear to Mr Dutia that he could not join as a Founding Partner because he was not one of the founding members, and had not been brought on board at the time of initial discussions with Stonehaven in 2008 as his skill set had not then been needed. In his witness statement Mr Dutia denied that this was ever made clear to him. Mr King pointed to this as a clash of evidence that could not be resolved at the summary stage. I agree, and propose to ignore for present purposes what may or may not have been said in this telephone conversation.

That completes the review of the material relied on by Mr King up to 1 October 2009. Since Mr Dutia’s case in relation to the Partnership Claim, as sought to be pleaded in the draft amended Particulars of Claim, is that an 1890 Act partnership came into existence

In summary what the evidence reveals, taking account of everything said by Mr Dutia in his witness statement, draft amended Particulars of Claim and Further Information, is that he signed up to a consultancy agreement on 17 August 2009 which described him as providing services to the LLP, which was in the process of raising the fund; that he was encouraged to start work under it, and later to work longer hours than it provided for, by assurances that everyone was in the same boat and the prospect being held out to him of having an equal stake in the project, but in circumstances where he knew that a formal offer detailing the package that would be available to him was being prepared; and that he was then offered, and accepted in principle, subject to certain points being clarified, a role that involved him working for the LLP on terms that would deliver potentially very large rewards to him, such rewards being derived from the business to be carried on by the LLP of managing the fund(s).

What is missing in any of this is any evidence that the parties intended or agreed to carry on business themselves rather than through the LLP. As the Chief Master put it (at [99] of his judgment):

His overall conclusion was as follows (at [104] of his judgment):

The remainder of the material that Mr King referred me to consisted of various subsequent developments up to March 2010, but I can deal with these rather more briefly, as it is not suggested that an 1890 Act partnership came into being subsequently to 1 October 2009, so the only question is whether they cast any doubt on the conclusions to be drawn in relation to the period up to that date. In short, they do not.

On 19 October 2009 Mr Dutia sent an e-mail to Mr Moore with suggestions on various possible deals. Mr King relied on this as an example of the contribution he was making to the pipeline of work. Mr Dutia said he had passed the comments on LLP structure etc to Philip [Pritchard] and David [a person working for Mr Pritchard] and would wait for further information before signing the offer letter “but you know I’m “in”.” Mr King said it was not right for the Chief Master to draw inferences from the document in the way he had in his judgment without the benefit of cross-examination; but all that the Chief Master had said was that he had said in this e-mail “I’m in”.

On 14 November 2009 Mr Moore sent an e-mail to Mr Florman and Mr Pritchard, starting off “All is not well in the land of Miten” and summarising what he saw as Mr Dutia’s frustrations. These included that he was asked to make time available in October but was then asked to hang around, so that he felt he was being mucked around and then not actually used; there was no feedback on the work he was doing; and that he was very focused on the tax structuring but felt it was being completely ignored. The upshot was that he was not prepared to commit to coming to a Partners’ meeting on 29/30 November on which Mr Moore commented:

On 16 January 2010, Mr Moore sent Mr Dutia an e-mail in which among other things he said:

On 13 March 2010 Mr Moore sent an e-mail to Mr Florman. Mr Dutia had raised a “special recognition” point, and wanted (i) this to be debated amongst all the partners and (ii) to be “given a slice of founder partner economics” and for only him to be given this. Mr Moore said that he would say that this should not be dealt with as an LLP issue; that they had brought in all the partners on the principle of equal economics and there was no support for changing this for Mr Dutia; but that there was support for a one-off payment to recognize his contribution in the pre-first close phase “which has been longer and more substantial than had been envisaged when his consultancy agreement was drawn up.” He recommended a one-off payment, and said that if Mr Dutia agreed then the LLP process could continue.

Mr King made the point that this was another internal e-mail, which contained material relevant to cross-examination; and used this to illustrate his submission that what the Chief Master had conducted amounted to a trial on the documents, but only on those documents of the Defendants which they had chosen to disclose, whereas the Partnership Claim ought to be decided after a trial in the usual way with full disclosure and cross-examination of both sides’ witnesses.

That completes the review of the material relied on by Mr King. None of the post-October matters in my judgment adds anything significant to the material in the period up to October. None of them casts any doubt on the conclusion that the Chief Master, correctly in my view, came to, that it is fanciful to suppose that running alongside Mr Dutia’s consultancy agreement with the LLP (under which he provided services to the LLP which was in the process of raising a fund), and the prospect of becoming a “partner” in the LLP (with a share of profits to be derived from the LLP’s business of managing the fund), which was held out to him to encourage him to work longer hours, there was in addition an agreement under which he and the Defendants were already carrying on business together in such a way as to give rise to an 1890 Act partnership.

I have thought it right to go through the material relied on by Mr King in detail as that was very much the way he structured his submissions. In doing that exercise I have already in effect explained why I consider the Chief Master was right to come to the conclusion he did. But Mr King also made submissions in support of five separate grounds of appeal.

The first of these was that the Chief Master had erred in law in stating that a partnership will not be inferred unless there is no other analysis capable of explaining the putative partners’ behaviour. What the Chief Master said, at [44(d)] of his judgment, was that an agreement (for an 1890 Act partnership) will not be inferred merely because their conduct is consistent with a partnership:

Mr King accepted that in order for there to be a partnership, there has to be an express or implied agreement (Blackett-Ord, Partnership Law, 5^th edn §2.1); that the principles applicable to an agreement to form a partnership are the same as those applicable to other contracts; and that where there is no express agreement, the Court must look at the entire suite of facts, and does so sceptically, as contracts are not lightly to be implied (Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 at 1202F per Bingham LJ, cited by the Chief Master at [23] of his judgment).

Mr King also referred to the statement, again by Bingham LJ, in The Aramis [1989] 1 Ll Rep 213 at 224, cited by the Chief Master at [25] of his judgment, that:

Similarly Mr King referred to the statement by Mance LJ in Baird Textiles Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274 at [61]-[62] that where an implied contract falls to be inferred from parties’ conduct, it is for the party asserting such a contract to show the necessity for implying it; if the parties would or might have acted as they did without any such contract, there is no necessity to imply any such contract. He pointed out that that too was a case where all that was relied on to infer a contract was conduct; and that the submission which the Court of Appeal was rejecting was that necessity is not the test for the implication of a contract from conduct (see at [15(a)] where Sir Andrew Morritt V-C records the submission of counsel, and at [21] where he rejects it). It is otherwise, suggests Mr King, where in addition to conduct you have communications passing between the parties. In such a case the Court has to look at all the facts, and no doubt look at them critically, but what the Court is ultimately trying to do is to give business efficacy to what the parties are doing. The Chief Master was therefore wrong to apply the test of necessity in the sense that a contract would only be inferred if the parties’ behaviour was incapable of being explained in some other way.

I do not think it is necessary for the purposes of this appeal to give a definitive answer to this question. There is certainly a considerable body of authority at Court of Appeal level, binding on me, that the test for the implication of a contract is necessity, some of which has been referred to above, but much of which has not. I consider it very doubtful in these circumstances if I could depart from this. But I will assume that Mr King is or may be right, and that the test that should be applied is whether, after looking at all the facts and everything that the parties did or said to each other, it is to be inferred that they agreed that they should carry on business in common such as to give rise to an 1890 Act partnership. Given that Mr King accepted that the purpose of inferring such an agreement would be to give business efficacy to what the parties were doing, I am not sure this differs very much in practice, if at all, from asking whether their conduct is only referable to such an agreement; but even if there is a discernible difference, it seems to me that what the Chief Master was doing in his judgment was exactly what Mr King said he should be doing. He examined all the facts relied on, and what the parties both did and said to each other, with a view to seeing if the Court was persuaded that it was fanciful that the parties had reached an agreement to carry on a business in common. He concluded (at [99] of his judgment) that the principal documents were not just contrary to Mr Dutia’s case but wholly inconsistent with it, and again (at [101]) that:

The Chief Master said at [46(a)] of his judgment that it was agreed that he should deal with the application on the assumption that Mr Dutia’s version of any disputed facts was accepted. Mr King however says that he ignored parts of Mr Dutia’s case, the most crucial aspect being what Mr Dutia said in his Further Information about what he was told.

He pointed to the evidence in Ms Bain’s notes that Mr Dutia needed to be tied in; and said that it was not inconsistent with an intention that the rewards would come from the LLP that there should be an 1890 Act partnership until that was put in place. He said that as a matter of law it was possible for those planning to run a business through a corporate body to have started in business together before the corporate body was up and running. The question was whether they had started in business together or had merely carried out preparatory acts. He referred by way of example to Khan v Miah [2000] 1 WLR 2123 where three individuals who were intending to go into business together in running a restaurant were held to have become partners when they carried out preliminary acts to the opening of the restaurant such as finding premises, obtaining planning permission, taking a lease and agreeing to buy the freehold, engaging builders to convert and fit it out, and buying equipment and linen. Lord Millett said (at 2127E) that there was no rule of law that parties to a joint venture do not become partners until actual trading commences; the rule is that persons who agree to carry on a business activity as a joint venture do not become partners until they actually embark on the activity in question.

I of course accept the principles laid down in Khan v Miah but I do not think they are directly in point. Khan v Miah concerns individuals who do intend to go into business together and is a decision as to when such a partnership starts – this is not (on the one hand) as early as when they reach agreement to become partners, nor (on the other hand) as late as when they start trading, but is when they actually embark on the venture. But the Chief Master’s decision in this case was not about whether the parties’ work in establishing the fund was merely preparatory or amounted to embarking on the activity in question; it was about whether there was any real prospect of showing that the parties’ work in establishing the fund was referable to an agreement to carry on business together themselves, or whether it was all referable to the setting up of a business to be carried on by the LLP.

I also accept that the mere fact that parties have contemplated that a business will ultimately be run through a corporate body is not necessarily inconsistent with the parties embarking on that business themselves in the period before the corporate body is established. This was something that the Chief Master was fully alive to: see the citation from his judgment at [99], which I have set out at paragraph 82 above, where he referred to this interim period as “the twilight period”. But he found on the facts that there was no real prospect of establishing that this was the correct analysis in the present case.

As to the suggestion that he failed to take into account Mr Dutia’s version of events, this was mainly directed at assertions in the Further Information which were not referred to in the Chief Master’s judgment. I was told that at the hearing before him little reference was in fact made to the Further Information which may explain why his judgment did not refer to the passages now relied on. But Mr King took me to all the passages he thought important, and I have considered them all above. For reasons given above, they do not seem to me to affect the essential basis of the Chief Master’s decision, or cast doubt on his conclusions.

This ground raises a discrete point. Mr Dutia’s pleaded case is that a partnership arose between him, Messrs Geldof, Florman, Moore and Pritchard, and CLSA. In his Further Information he was specifically asked whether it was still alleged that CLSA was a partner in the alleged partnership, to which he replied “It is”.

In his judgment at [102] the Chief Master, having said that a partnership did not fall to be inferred, said that there was in any event a factor fatal to Mr Dutia’s case, namely that he had nowhere explained, in his pleadings or his evidence, how CLSA became a partner with the 5 individuals, there being no reference in any of the documents, or conversations, to CLSA having an intention to act in common with the others or carrying on a business with them. The Chief Master had earlier said (at [92]) that if any one of the 6 partners was not a party to an agreement to the carrying on of the same business in common with the others with a view of profit, then the claim was bound to fail, Mr Dutia not putting forward any alternative case concerning a partnership with a smaller number of partners.

In the event this point does not assist Mr Dutia as even if he were right about it, it would not be a ground for overturning the Chief Master’s decision which I have already held to have been justified on other grounds. But dealing with it briefly, I agree with the Chief Master that a partnership alleged between 6 partners requires proof that all 6 have become partners. It was submitted in a skeleton argument prepared for Mr Dutia that if a partnership is alleged between 6 people, and the Court finds that only 5 of them were partners, there is no reason why it should not uphold the claim. As a matter of technical law I do not think this is right – an allegation that there was a partnership between A, B and C is clearly different from an allegation that there was a partnership between A and B alone, and it must follow that an allegation of a partnership between 6 parties is a different allegation from one of partnership between 5 parties.

Mr King’s oral submissions focused rather more on two other points, the first being that there were references to CLSA throughout the documents, that e-mails went to Mr Pritchard at CLSA and that CLSA in due course became a member of the LLP as it seems it was always envisaged it would. Even accepting all this, I do not think the Chief Master erred in his assessment that there had been no explanation from Mr Dutia how CLSA became a partner. None of the material which I was taken through begins to suggest that there was ever any relevant reference to CLSA in any of the e-mails and conversations relied on, or that Mr Dutia in any meaningful sense thought he was dealing with CLSA: what he says about it in his witness statement is that he knew that it had made a certain amount of seed capital available.

The second point was that it was unfair to strike out Mr Dutia’s Partnership Claim on the basis that he had not said that he had an alternative case that he was a partner with the first four Defendants alone. It is no doubt true as a general proposition that a Court will be slow to grant summary judgment against a claimant if a viable amendment can be made which would save the case, although in circumstances where Mr Dutia had been given a specific opportunity in the Further Information to address the question whether his case was still that CLSA was a partner and had failed to suggest that he had an alternative case as a fall-back, I can see that it might be different. As it is, the point does not arise as even without this point the claim stands no real prospect of success, and I therefore say no more about it.

This is another discrete point which does not in the event arise. Mr Dutia’s pleaded case was that the partnership continued up to the issue of the claim and in his Particulars of Claim he purported to give notice of his intention to dissolve the partnership with immediate effect. The Chief Master held (at [105] of his judgment) that if the partnership had come into being, it must have come to an end long before the claim was issued and served, at the latest on the date he resigned as Investment Partner.

Mr King relied on the skeleton argument prepared for Mr Dutia which suggested that the Chief Master should not have embarked on this question: it did not arise out of the summary judgment application, and it could not be said that it was a complete answer to the Partnership Claim: if a partnership had come into existence, it had never been wound up and Mr Dutia was still entitled to relief.

I do not propose to enter into this particular debate. It does not affect the outcome of the appeal, does not arise, and on my view of the appeal can never now arise. Nothing useful would be served in considering it.

The complaint under this ground is that the Chief Master conducted a mini-trial on the documents – and only on such documents as the Defendants had chosen to put forward – in a way that is impermissible.

The Chief Master was well aware of the applicable principles – he included the well-known summary of the principles by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) as an appendix to his judgment. He specifically adverted (at [7] of his judgment) to what he called the prohibition on conducting a mini-trial, saying that it

I agree with his approach and conclusions. Specifically, there was considerable documentary evidence available to the Court, supplemented by extensive witness evidence from Mr Dutia, which explained how he put his case. Since what he agreed with the Defendants must ultimately turn on what they said to him (orally and in writing) and their conduct towards him, it is unlikely that disclosure would add significantly to the fundamentals of the case he sought to make. I agree with the Chief Master that the exhortation not to conduct a mini-trial is primarily directed at any attempt to evaluate disputed evidence or rival versions of events; what it does not mean is that it is impermissible to examine how a claimant puts his case and the material he relies on in support of it to see whether such a case has any real prospect of success. If it can be seen after such examination that the material relied on by the claimant himself does not provide support for the case he wishes to run, and if there is no reason to think that any further evidence available at trial will alter that position, then the Court is fully entitled to conclude that the case is in truth fanciful such that it has no real prospect of success, and, as I have already said, the Court not only can, but in general should, use its powers to grant summary judgment in such a case. This is because to do so furthers the overriding objective.

The exercise that the Chief Master undertook – and indeed the similar exercise which I was asked to undertake on this appeal – was of this nature. It was not an attempt to form a view as to where the truth of disputed facts might lie, but an examination of the material relied on by Mr Dutia in support of the Partnership Claim to see whether that claim had any reality to it and was fit for trial at all. I see nothing improper in the exercise, and nothing wrong in the conclusion.

None of the grounds of appeal, although ably argued by Mr King, leads to the conclusion that there was any error in the Chief Master’s decision. I therefore dismiss the appeal.