Inversiones Frieira SL & Anor v Colyzeo Investors II LP & Anor

A limited partner’s statutory right to inspect partnership books and examine the state and prospects of the business is not confined to summary financial accounts. The scope of access is functional and depends on the partnership’s business, governing documents and current practice. Documents establishing partnership assets, liabilities, valuations and relevant transactions may fall within the right. Delegation of management does not relieve the general partner of its duties to supervise and account. Motive is irrelevant to a statutory inspection right, although a contractual right may be restricted in a very plain case of manifestly improper purpose. Any control should ordinarily be exercised by restraining misuse of information, rather than withholding access.

The claimants were limited partners and substantial investors in a limited partnership established for European real-estate-related co-investments. The general partner delegated investment management and operational functions to a connected company. Following substantial losses, the claimants sought inspection and copying of documents concerning the Partnership’s investments, including transaction, financing, hedging, valuation and advisory materials.

The defendants contended that the claimants were entitled only to summary financial books and accounts, and that the application was an improper attempt to investigate a potential claim. The central issues were the scope of the statutory and contractual rights of inspection, the effect of delegation, the proper defendant, and the relevance of the claimants’ purpose.

1. Nature of the rights. The claimants were partners in law, not merely investors. Every partner has a right to disclosure of all matters relating to partnership dealings and transactions. That principle applies equally to limited partners and is reflected in section 28 of the Partnership Act 1890. Section 7 of the Limited Partnerships Act 1907 applies the ordinary partnership rules, subject to that Act.
2. Statutory right. Section 6(1) of the Limited Partnerships Act 1907 does not limit access to summary accounting records. Its proviso recognises that a limited partner may inspect the firm’s books, examine the state and prospects of the business, and advise with the partners without thereby taking part in management.
3. Functional scope. The relevant test is whether the document or record is necessary or advantageous to establish the Partnership’s rights against third parties, determine or adjust the partners’ rights between themselves, or understand the current state and prospects of the business. The right may extend to documents of title, joint-venture and special-purpose-vehicle documents, loan and hedging arrangements, valuation support and relevant professional advice. Internal documents of the manager and unsuccessful proposals ordinarily fall outside the right.
4. Delegation and confidentiality. Delegation to the manager did not release the general partner from supervising it, holding it to account or obtaining relevant information. Access could be subject to redaction where documents contained confidential information concerning another client or person.
5. Purpose and use. Motive is irrelevant to the statutory right. A contractual right may be withheld only in a very plain case where it is being used for a manifestly improper purpose. The proper control is ordinarily over the use of information obtained, not the initial access.
6. Enforcement. The statutory and contractual rights could be enforced directly against the general partner and other partners. The claimants had no direct contractual right against the manager under the Management Agreement, although a possible tortious remedy was left as a tentative, unargued matter.
7. The parties were directed to attempt to agree the application of these principles to the requested document categories. Remaining disputes, including costs, were to be restored before the judge.

First-instance judgment. The court determined the governing principles and directed the parties to agree their application to the document categories, with unresolved matters to be restored.