Certain Limited Partners in Henderson PFI Secondary Fund II LLP v Henderson PFI Secondary Fund II LP & Ors [2012] EWHC 3259 (Comm) (16 November 2012)

Certain Limited Partners in Henderson PFI Secondary Fund II LLP v Henderson PFI Secondary Fund II LP & Ors [2012] EWHC 3259 (Comm) (16 November 2012)

Limited partners may bring a derivative action against the Manager on behalf of the Partnership only in special circumstances, such as an irreconcilable conflict of interest on the part of the General Partner. However, by doing so, limited partners are deemed to take part in the management of the partnership business under s.6(1) LPA 1907 and become liable for all debts and obligations of the firm incurred during that period, as if they were general partners. There is no need or room for a derivative action against the General Partner, as limited partners may sue the General Partner directly for their own losses under the RPA.

Citation
[2012] EWHC 3259 (Comm)
Parties
Claimant: Certain Limited Partners in Henderson PFI Secondary Fund II LLP; Defendant: Henderson PFI Secondary Fund II LP; Defendant: Henderson Equity Partners Limited; Defendant: Henderson Equity Partners (GP) Limited
Jurisdiction
England and Wales
Judgment Date
16 November 2012
Procedural Posture
Commercial Court Preliminary Issues / Judgment on Preliminary Issues
Outcome
Partially in favour of defendants; derivative action against Manager permitted but with unlimited liability for limited partners; no derivative action against General Partner permitted.
Legal Topics
Derivative Actions, Limited Partnerships, Conflict of Interest, Management of Partnerships, Interpretation of Partnership Agreements
Partnership Law Equity and Trusts Commercial Law Derivative Actions Limited Partnerships Conflict of Interest Management of Partnerships Interpretation of Partnership Agreements

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Parties

Certain Limited Partners in Henderson PFI Secondary Fund II LLP

Claimant

Henderson PFI Secondary Fund II LP

Defendant

Henderson Equity Partners Limited

Defendant

Henderson Equity Partners (GP) Limited

Defendant

Procedural Posture

Commercial Court Preliminary Issues / Judgment on Preliminary Issues

Legal Issues

  1. 1 Whether limited partners may bring a derivative action against the Manager and General Partner on behalf of the Partnership under the Limited Partnerships Act 1907 and the Restated Partnership Agreement;
  2. 2 Whether pursuit of such derivative claims constitutes taking part in management under s.6(1) LPA 1907, exposing limited partners to unlimited liability;
  3. 3 Whether the investment in John Laing plc breached the Partnership's investment objectives and contractual restrictions;

Ratio Decidendi

Limited partners may bring a derivative action against the Manager on behalf of the Partnership only in special circumstances, such as an irreconcilable conflict of interest on the part of the General Partner. However, by doing so, limited partners are deemed to take part in the management of the partnership business under s.6(1) LPA 1907 and become liable for all debts and obligations of the firm incurred during that period, as if they were general partners. There is no need or room for a derivative action against the General Partner, as limited partners may sue the General Partner directly for their own losses under the RPA.

Court Disposition

Partially in favour of defendants; derivative action against Manager permitted but with unlimited liability for limited partners; no derivative action against General Partner permitted.

Orders

  • Claimants are not entitled to a declaration that pursuit of derivative claims will not constitute management under s.6(1) LPA 1907;
  • Claimants may pursue derivative claims against the Manager on behalf of the Partnership, but by doing so, become liable for all partnership debts incurred during that period as if general partners;