Neutral Citation Number: [2011] EWHC 1851 (Ch)
Case No: HC09C00709
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 14/07/2011

Before :

THE HONOURABLE MR JUSTICE SALES
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Between :

	F&C Alternative Investments (Holdings) Limited	Claimant/Part 20 Defendant	
	- and -		
	(1)	Francois Barthelemy
(2)	Anthony Culligan
	Defendants/
Part 20 Claimants

									No. 15000 of 2010

AND IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

In the Matter of F&C Partners LLP
and
In the Matter of the Companies Act 1985
and
In the Matter of the Limited Liability Partnerships Act 2000

Between :

	(1)	Francois Barthelemy
(2)	Anthony Culligan	Petitioners	
	- and -		
	(1)	F&C Alternative Investments (Holdings) Limited
(2)	F&C Partners LLP
(3)	F&C Asset Management plc	Respondents

													No. 3555 of 2010

AND IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

In the Matter of F&C Partners LLP
and
In the Matter of the Companies Act 2006
and
In the Matter of the Limited Liability Partnerships Act 2000
and
In the Matter of the Limited Liability Partnerships
(Application of Companies Act 2006) Regulations 2009

Between :

	          F&C Investments (Holdings) Limited	Cross-Petitioner	
	- and -		
	(1)	Francois Barthelemy
(2)	Anthony Culligan
(3)	F&C Partners LLP
	Respondents

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- - - - - - - - - - - - - - - - - - - - -

Mr Andrew Ayres (instructed by Norton Rose) for the Claimant
 Mr Andrew Thompson (instructed by Jeffrey Green Russell) for the Defendants

Hearing dates: 14/7/11
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Judgment

Mr Justice Sales :
1.	This is an application by Mr Barthelemy and Mr Culligan, supported by F&C, in relation to a draft judgment which I have provided to the parties in accordance with the modern practice for them to check it for typographical errors or obvious factual errors. The parties have now reached a settlement agreement, conditional on the court not handing down the final judgment in open court. The application is that I should not hand down the judgment, so that the settlement agreement can take effect. In these circumstances the court has a discretion how to proceed, weighing aspects of the public interest along with the wishes and interests of the parties to the proceedings: Prudential Assurance Co. Ltd v McBains Cooper [2000] 1 WLR 2000 (CA); Liverpool Roman Catholic Archdiocesan Trustees v Goldberg (No. 3) [2001] 1 WLR 2337. 
2.	The draft judgment relates to a dispute between F&C and Mr Barthelemy and Mr Culligan concerning the operations of F&C Partners LLP (“the LLP”), a limited liability partnership between Mr Barthelemy and Mr Culligan (whom I will call “the Defendants”, in line with the use of that term in the draft judgment) and F&C Alternative Investments (Holdings) Ltd (“Holdings”), established under an agreement dated December 2004 (“the Agreement”) to carry on a  fund of hedge fund business. The Agreement was made so as to establish the LLP as a corporate entity under the Limited Liability Partnerships Act 2000 (“the LLPA”). The Agreement provided for the Defendants to have a right to exercise a put option to require Holdings to acquire their interests in the LLP on preferential terms if Holdings breached the Agreement in certain circumstances. In the proceedings, the Defendants claimed that they had validly exercised such put option rights on three occasions. Holdings denied this. In addition to the claim under CPR Part 7 in relation to this issue, the Defendants also brought a petition against Holdings and its parent company, F&C Asset Management plc (“F&C plc”), under section 994 of the Companies Act 2006, claiming that Holdings and F&C plc had conducted the affairs of the LLP in an unfairly prejudicial manner. Holdings, for its part, denied this and brought a cross-petition under section 994, claiming that the Defendants had themselves conducted the affairs of the LLP in a manner unfairly prejudicial to it. 
3.	The trial lasted a long time and involved a significant number of witnesses. It was hard fought litigation, with serious allegations being made on each side. Part of the case for the Defendants was that F&C had formed a scheme to drive the LLP out of business so as to avoid having to buy out the Defendants’ interests in it at a substantial price. F&C called many witnesses to deny this allegation. To pursue this aspect of the Defendants’ case, their Counsel sought to put the credibility of these witnesses in issue in the course of cross-examination and submissions.
4.	The trial finished on 24 March 2011. I issued the draft judgment to the parties on 23 June 2011. It is a lengthy judgment, so I allowed a longer time than usual for the parties to check it. I required the parties to send in any suggested corrections on 4 July 2011 and scheduled the hand down of the judgment for 6 July. The parties supplied me with suggested corrections on 4 July. Later that same day, I had a message from Mr Thompson, Counsel for the Defendants, to inform me that the parties were in active negotiations to try to settle the case. Meanwhile, I checked the draft judgment and made any necessary corrections. It is now in final form ready to be handed down.
5.	At about 1.30 pm on 5 July I had a further message from Mr Thompson. He informed me that the parties had now reached a settlement, which was conditional on the judgment not being handed down by the court; that the Defendants regarded the terms of the settlement “as very good indeed from their perspective”; and that accordingly they now urged me not to hand down the judgment.  This did not strike me as a straightforward request, so I arranged for the listing for hand down of the judgment to be re-scheduled for 14 July with sufficient time to allow the Defendants to develop their arguments orally. F&C has indicated that it supports their application, but had no additional submissions which it wished to make other than a few supplementary supportive submissions made by Mr Ayres at the oral hearing to determine whether I should hand down the judgment.
6.	This is the ruling on the Defendants’ application that the judgment should not be handed down, so as to allow the settlement agreement to take effect.
7.	In the exercise of my discretion, it is my clear view that the application should be dismissed and that the judgment should be handed down. In reaching that conclusion, I have taken carefully into account the submissions of the Defendants, their witness statements in support of the application and their strong and reasonable wish to bring these proceedings to an end on terms favourable to them. I have very much in mind what must have been the considerable strain for them and their families - as individuals conducting this litigation against a well-funded corporate group - and the desirability, all other things being equal, of their being able to bring this episode conclusively to an end. I also have in mind that, in general terms, in relation to litigation between private parties the courts exist to resolve extant disputes, so considerable weight should be given to the wishes of the parties if they succeed in settling their dispute before judgment is finally handed down. There is also a public interest in avoiding the further expenditure of court time and resources to bring a dispute to an end. 
8.	On the other hand, I also have in mind that it is not the function of the practice of providing judgments to the parties in draft before hand down to allow them “to have more material available to them to help them to settle their dispute” (see Prudential Assurance at [2000] 1 WLR at p. 2008E). The parties here had a long time in which to settle their dispute. It appears from the timing when Mr Thompson informed me, as part of his professional obligation (see HFC Bank Plc v HSBC Bank Plc, Court of Appeal, unrep., 10 February 2000), of the existence of active settlement negotiations that this round of negotiations was entered into on the basis of knowledge of the terms of the draft judgment. Moreover, the settlement agreement has been reached on a conditional basis on the footing that both parties are well aware that, at this stage, the court has a discretion to proceed to hand down judgment. They have consciously taken a risk that the condition in their agreement might not be fulfilled. 
9.	In my judgment, there are four aspects of the public interest which – particularly when taken together – strongly outweigh the private interests of the parties and the countervailing public interest in this case in favour of suppressing the judgment in order to bring the litigation to an end:
i)	The judgment contains a detailed review of the conduct of a range of entities and individuals holding approvals from the relevant regulator, the Financial Services Authority (“the FSA”). Many of them are the subject of criticism of their conduct in varying degrees in the judgment. I refer, for example, to the LLP, Holdings, Mr Ribeiro, Mr Mackay and Mr Mendez de Vigo. I also refer to the Defendants, who were the subject of criticisms as well. I consider that it is strongly in the public interest that the regulator of financial services companies such as the LLP, Holdings and F&C plc should have available to it a final and fully considered judgment of the High Court making detailed findings of fact in such a case, so that it can assess for itself the significance in the relevant regulatory context of any findings and criticisms made by the court. The strong public interest in the FSA being fully informed about relevant matters affecting approved persons and entities is reflected in the FSA rules requiring openness and co-operation in dealings with the FSA: see e.g. para. [94] of the judgment (principle 11);
ii)	The LLP gave notice to the FSA of the removal of Mr Barthelemy and Mr Culligan from management positions in the LLP and provided the FSA with the Mackay Final Report and the Bergin Opinion, suggesting that they had been guilty of criminal offences and serious wrong-doing. The Defendants have invited the FSA to postpone consideration of those materials and any action in light of them until the outcome of the trial is known; they also set out for the FSA their own contentions regarding alleged wrongdoing on the part of F&C (paras. [1055]-[1056] and [1079] of the judgment). In my view, now that the court has gone through the long exercise of a detailed examination of the circumstances in which those complaints were made and of their merits (or lack of them), it would not be appropriate to leave the FSA without the full knowledge of the facts and findings of the court in relation to those matters which are contained in the judgment. The Defendants and F&C have attempted to meet this point by agreeing the wording of an Agreed Joint Statement to the FSA attached as Annex 2 to the settlement agreement. I do not think that substituting that Agreed Joint Statement for the full terms of the judgment as a means of informing the FSA about the circumstances of the case would be remotely satisfactory. Although in the judgment I found that the main thrust of the LLP’s complaints about the Defendants was misplaced, I was also critical about aspects of the Defendants’ conduct (for example, regarding how the state of affairs had arisen in which the precise policies applicable to the LLP had been left in a state of uncertainty: paras. [120]-[121] of the judgment; and the way in which Mr Culligan, by his adaptations of the LLP IT system, created an unacceptable risk in relation to the F&C IT system: paras. [582]-[598] of the judgment). The Agreed Joint Statement does not reflect any of this, nor does it give the FSA a clear picture of the rights and wrongs in relation to the dispute, of which it is on notice;
iii)	Quite apart from the public interest in ensuring that the FSA is properly informed about the dispute, there are interests of persons other than the parties which should be taken into account. The Defendants’ case at trial involved mounting a claim of a widespread conspiracy within F&C to damage the business of the LLP, and each of F&C’s witnesses who denied this had their credibility and honesty attacked by Counsel for the Defendants. These attacks were carried out in the public forum of a trial. I rejected this aspect of the Defendants’ case, and many of the F&C witnesses I found to be completely honest and credible witnesses (in particular, Mr Mendez de Vigo, Ms Hall, Mr Niven, Mr Cole, Mr Johns, Mr Kramer and Mr De Groot). Even in relation to those F&C witnesses who did come in for some criticism (in particular Mr Ribeiro, Mr Mackay and Mr Moir), I rejected the wider claims of conspiracy levelled against them and the suggestions that I should reject large parts of their evidence. In my view, where a court has reached firm conclusions in a final form judgment which exonerate witnesses from such serious charges, publicly levelled against them, it is in the public interest that the judgment should be handed down so that the extent to which their evidence has in fact been found to be truthful by the court can be seen;
iv)	The judgment addresses a range of legal issues which, in my view, it would be in the public interest to be made the subject of a published judgment for the development of the law and guidance to others (cf Liverpool Roman Catholic Archdiocesan Trustees v Goldberg (No. 3), above). The various points of law were the subject of detailed argument and consideration by the court. In particular, I think it would be desirable for the judgment to be handed down so as to deal with the operation of the LLPA 2000 (I understand from the parties that there is no other relevant authority at present dealing with this important legislation) (judgment paras. [204]-[254], esp. [207]-[216]); the operation of section 994 of the Companies Act 2006 in the present context (in particular, the test to be applied in relation to attribution of the unfairly prejudicial conduct in question to a defendant for the purposes of the section and how the section applies where a person with compliance officer responsibilities takes action: paras. [1094]-[1107] of the judgment); the test for implying terms into a contract as a matter of law and the obligation to plead such terms (paras. [260]-[261] of the judgment); the circumstances in which a Mackay v Dick type implied term will be implied into a multi-partite contract (paras. [263]-[274] of the judgment); and the circumstances in which and extent to which it may be appropriate to modify the usual Bristol and West Building Society  v Mothew [1998] Ch 1 approach to fiduciary obligations (paras. [217]-[254] of the judgment). I think the first item in this list, and the judgment at paras. [207]-[216] on the question whether Members of a limited liability partnership owe fiduciary duties to each other, is particularly significant. At the moment, the main guidance on this point is provided by the respected academic commentary, Palmer’s Limited Liability Partnership Law, relied upon by Mr Thompson in his submissions (see para. [210] of the judgment); however, I have come to the conclusion that in an important respect the guidance in the commentary could be misleading (see para. [211] of the judgment). It is desirable that the contrary and (in my opinion) correct view should be made generally available.  
10.	In light of the nature of these factors, I do not think it would be possible or appropriate to try to produce a partial judgment which did not go fully into the facts. Even in relation to point (iv) above, the legal issues cannot, I think, be properly understood without a good understanding of the relevant facts.
11.	Even taking the Defendants’ concerns about the extent of their exposure to further litigation with F&C at their highest, I consider that the factors above lead to the conclusion that I should hand down the judgment. However, I would add that I think that the Defendants’ concerns regarding the risk and extent of such exposure as put to me are somewhat over-blown.
12.	I make some brief observations about what, in my assessment, is really at stake for the Defendants if the settlement agreement does not take effect. I consider that their fears of being locked into long-term litigation with F&C are likely to be misplaced. It is said that F&C has commenced work on preparing for an appeal, if the settlement agreement does not take effect. I have been given no details of what might be the grounds of any appeal. On the information available to me at present, I am doubtful that F&C are likely to be successful in getting an appeal off the ground. So far as the Part 7 proceedings are concerned, as presently advised I think the outcome of the case turns on the particular facts as found by the court rather than any issue of law or construction - so this does not look promising territory for F&C in terms of seeking permission to appeal. So far as the Defendants’ success on the Petition and Cross-Petition are concerned, the court was required to make an overall evaluative assessment informed to a very substantial degree by its findings of fact - again, this does not look promising territory for F&C in terms of seeking permission to appeal: cf Boughtwood v Oak Investment Partners XII Ltd Partnership [2010] EWCA Civ 23; [2010] 2 BCLC 459.
13.	If there is no settlement, the proceedings will continue, to determine the amount of the sum due from F&C to the Defendants. However, on the findings I have made I do not think that the time or effort required to establish the sum due to the Defendants as the price payable under the Put Option will be especially great. The formula for the price is given by the Agreement and, since I have rejected the Defendants’ case that F&C conspired to damage the business of the LLP, as at present advised I think it is unlikely that the Defendants will be on promising ground in so far as they seek to contend that the amount of the sums due should be increased beyond the amounts given by that formula. The same is true in relation to their claims under sections 994 to 996. There seems to me to be grounds for thinking there is scope for settlement of the further proceedings even if the judgment is handed down. That may also be true in relation to any costs issues. On any view, if there is no settlement, the arguments on these points will not be on anything like the scale of the argument on liability, and they should be capable of being dealt with in a reasonable and proportionate manner.
14.	In any event, when the judgment is handed down the court will be in a position to protect the Defendants’ legitimate interests in relation to their claims in an effective way, including by making orders for interim payments where appropriate.
15.	I conclude that I should proceed to hand down the judgment.

[After this ruling was given the parties made no application for permission to appeal in relation to it. Accordingly, the judgment in the proceedings was handed down with the neutral citation number [2011] EWHC 1731 (Ch)]