The relationship between US LLCs and UK partnerships

LLC law is in many, many respects partnership law wearing different clothing.  The first LLC statutes were an amalgam of the then current uniform general partnership act and the uniform limited partnership act.  Indeed, many LLC statutes still include a statutory apparent authority provision derived from Section 9 of the Uniform Partnership Act of 1914, which as you may know was based heavily on the English Partnership Act of 1890.  In re Hall's Estate, 1919 WL 2957, at *3 (Pa. Orph. 1919), aff'd, 266 Pa. 312, 109 A. 697 (1920) (“[In] the article in the Central Law Journal, vol. 80, page 435, written by Walter George Smith, Esq., who was Chairman of the Committee on Commercial Law of the Commissioners on Uniform State Laws, under whose direction the act was drafted, … he says: ‘The draftsman, William Draper Lewis, Esq., formerly Dean of the Law School of the University of Pennsylvania, and now one of its professors, based his work upon the English Partnership Act,’ etc.”)

 

Dan Kleinberger

Recent UK partnership/LLP cases

Dinesh Kotak v Jagdish Kotak and others [2017] EWHC 1821 (Ch)

The bank and two partners in a commercial property partnership disputed the scope of a bank mandate signed by both partners. The court held that the mandate authorised future borrowing by just one partner, but that even if this was not correct, s5 of the Partnership Act 1890 applied to give the sole partner who had signed the loan agreements ostensible authority to do so. In determining whether an act of a partner constituted the carrying on of a particular business in the usual way, as required by s5, the court had to examine whether the conduct in question was usual to the type of business carried on by the partnership, both when viewed at a high level of generality and when examined in detail (JJ Coughlan Ltd v Ruparelia [2014] PNLR 4). The question was not whether the conduct was carried out in the usual way of a business of a relevant kind, but whether a rational, competent, reasonable counterparty to the transaction at issue would so regard it. Since it was an everyday action of a commercial property business to operate on borrowed money, the acts of borrowing at issue here were clearly usual for the kind of business carried on by the partnership.

 

Halborg v EMW Law LLP [2017] EWCA Civ 793

Halborg, a sole practitioner solicitor, was the solicitor on the record in relation to legal proceedings against his client. He appointed the respondent LLP to act as his agent in those proceedings, and was subsequently ordered to pay LLP’s costs. He appealed on the ground that the LLP should have been treated as a litigant in person and its recoverable costs limited accordingly. The Court of Appeal dismissed the appeal, holding that the LLP was not a litigant in person within the meaning of the Civil Procedure Rules 1998 (CPR) rule 46.5(6). This rule states that a litigant in person includes (a) a company or corporation which is acting without a legal representative; and (b) (inter alia) a solicitor, except where he is represented by a firm in which he is a partner. The LLP was not a litigant in person under CPR 48.5(6)(a) because, although it was a corporation, it had acted with a legal representative. The fact that this was an in-house legal representative made no difference. The court also held that the LLP could not be a litigant in person under CPR 48.5(6)(b) because that only applied to individuals, but that if it was wrong on this point, CPR 48.5(6)(b) was capable of applying where an LLP member or the LLP itself was represented by the LLP. The word ‘firm’ included a sole practitioner, and ‘partner’ included a case where there was only one principal in the firm. An LLP and its members should be treated in the same way as a partnership, since the fact that an LLP had separate legal personality and its members had limited liability was not relevant to the rationale for the principle that a solicitor who acted for himself in litigation could recover his expenses and his profit costs.

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Inaugural Conference of the Partnership, LLP and LLC Law Academic Forum

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