Barclays Bank Plc v Nylon Capital LLP

An expert-determination clause covering disputes regarding profit or loss allocations must be read in the context of the agreement as a whole. Its broad wording does not extend to a dispute with no connection to an actual or potential contractual allocation. An allocation clause concerning the profits of a limited liability partnership does not, without clear contractual language, divert a member’s own investment profits to the partnership or its members. Where the expert-determination clause is inapplicable, a stay should be refused. A claim begun under Part 8 may be directed to continue under Part 7 where material factual matters require determination.

Barclays Bank plc was an investment member of Nylon Capital LLP and sought declarations concerning its alleged liability for partnership expenses and its profits from investments in associated funds. Nylon applied for a stay under clause 26.1 of the LLP Agreement, which provided for expert determination of disputes regarding profit or loss allocations under clause 9. Barclays also sought permission to amend its Part 8 claim. The court had to determine whether either dispute fell within clause 26.1, whether a stay should be granted, and whether the proceedings should continue under Part 7.

1. Expert determination. Clause 26.1 was to be given the broad construction advanced by Nylon, but the relevant dispute still had to have some connection with an allocation of profit or loss pursuant to clause 9. The references in clause 26.1(B) to disputes concerning interpretation and jurisdiction did not remove that requirement.
2. Expenses dispute. Nylon no longer alleged that Barclays had a personal obligation to pay or reimburse the partnership’s expenses. Those expenses were relevant only to the Managing Member’s future calculation and allocation of partnership profits. Since no allocation had been made and there was no dispute about an actual or potential allocation, there was nothing for an expert to determine.
3. Investment profits. Clause 9.3 dealt with the allocation of Nylon’s profits, determined by reference to Nylon’s accounts prepared in accordance with generally accepted accounting principles. The accounts did not treat income or gains accruing to Barclays from its investments as Nylon’s income. No contractual provision required Barclays to account for those profits to Nylon. The definition of “BB Investment Profits” did not itself create such an obligation.
4. The structure and context of clause 9.3 displaced a literal reading of the definition. The reference in clause 9.3(E) to the remainder of the BB Investment Profits was a misdescription if it meant Barclays’ own investment profits. It referred instead to Nylon’s profits derived from managing that investment. The dispute concerning Barclays’ investment profits therefore fell outside clause 26.1.
5. The stay application was dismissed. Barclays was permitted to amend its claim. A declaration concerning expenses was limited to the absence of any personal obligation by Barclays to pay or provide for those expenses. Under CPR rule 8.8(2), the claim was directed to continue as if commenced under Part 7 because Nylon intended to raise factual matters concerning execution of the LLP Agreement.