New UK case on LLP member's duties

Riley v Reddish LLP, 7 June 2019, unreported

The appellant had been a member of an LLP which had acquired shares in a company.  He was sued by the seller of the shares for the purchase price of £1.3 million. The court held that the LLP was liable for the purchase price, but it went into liquidation and was unable to pay.  The LLP then sued and obtained judgment against the appellant for the purchase price. The appellant’s claim to have his judgment set aside on the grounds that he had refused service of the claim form and the particulars of claim was rejected.

On appeal, the court held that although the LLP had alleged that the appellant was a director who had breached his duties under the Companies Act 2006, LLPs did not owe fiduciary duties under that Act, and directors’ duties could not be transposed on to LLP members. Whether an LLP member owed duties depended on his role in the LLP affairs (see further F&C Alternative Investments v Barthelemy [2011] EWHC 1731 (Ch)). Here there was no evidence of any agreement about his role, and it was therefore not possible to establish that he was in breach of duty.  Since there was a reasonable prospect that he would be able to defend the claim, the court exercised its discretion under the Civil Procedure Rules (CPR) r.13.3 to allow the appeal and set aside the judgment against him.  The court noted that refusing the appeal would have meant imposing a substantial liability on the appellant as punishment for refusing to accept service of documents, which would be disproportionate.

Add comment

Resources

Biographies

Links

Second Annual Conference of the Partnership, LLP and LLC Law Forum 10 January 2019

Comment List

  • None
This website is supported by the Society for Legal Scholars (SLS) Small Projects and Events Fund. The SLS is the learned society for those who teach law in a university or similar institution or who are otherwise engaged in legal scholarship. www.legalscholars.ac.uk