Inversiones Friera SL v. Colyzeo Investors II LP

The court held that a limited partner in an English limited partnership has a statutory and equitable right to information sufficient to "inspect the books of the firm and examine into the state and prospects of the partnership business" (section 6 of the Limited Partnerships Act 1907 and section 28 of the Partnership Act 1890 express this principle). The partnership deed and the management agreement may modify those rights but, read together, they required the manager (CIM) to maintain full and accurate partnership books and records and to afford partners access to records and books of account "for a purpose reasonably related to the Partner's interest".

What documents fall within that right is a functional question: partners are entitled not only to summary accounting records but also to underlying documents where those documents are necessary to establish the partnership's assets, liabilities, valuations or other matters required to examine the state and prospects of the partnership. The court emphasised limits: documents unrelated to the current state or prospects (e.g. aborted proposals) are not in principle disclosable, confidential third-party client information may be redacted (clause 5.2 of the Management Agreement), and purely internal documents of the manager not necessary for partnership accounting or to establish partnership rights are not partnership books or records.

This was a Part 8 claim by the two largest investors in Colyzeo Investors II LP (IFS and IVS) seeking an order that the partnership (acting by its general partner, Capital) and its manager (CIM) permit inspection and copying of extensive categories of documents concerning investments managed by CIM. The claim lists some sixty categories of documents, including transactional documents, hedging documentation, loan agreements, custodial arrangements, presentations to the Advisory Committee, valuation support, and professional advice obtained in connection with investments.

The central issues framed by the court were (i) the scope of a limited partner's statutory right under the Limited Partnerships Act 1907 (section 6) and the Partnership Act 1890 (section 28) to inspect partnership "books" and related contractual rights under the partnership deed and the management agreement; (ii) whether that right is limited to summary accounting records or extends to underlying operational and transactional documents; (iii) against whom those rights may be enforced (the general partner and/or the manager); and (iv) whether the claimant's motive to investigate potential litigation or alleged mismanagement could defeat the right of access.

The court reasoned that (i) the statutory and equitable duty to render true accounts and full information applies equally to limited partners, subject to any explicit modification in the partnership agreements; (ii) the deed and management agreement required CIM to keep full and accurate books of the partnership and to provide partners with "full and complete access" to records and books of account for purposes reasonably related to their interests; (iii) the proper test is functional rather than rigid: if a document is necessary or advantageous for the partnership or its agents to rely on against third parties or to determine partners' rights inter se, or if the partnership paid for it, then it forms part of the partnership records and is in principle inspectable; (iv) this can include transactional documents, title documents, joint venture agreements, loan and hedging agreements, valuation support and professional advice paid by the partnership, and minutes or instructions reflecting the manager's conduct on behalf of the partnership; (v) internal managerial papers and routine internal notes of CIM that do not form part of the partnership records are not inspectable; (vi) confidentiality protection in clause 5.2 of the Management Agreement may justify redaction of third-party confidential material; and (vii) the partner's motive is irrelevant to the statutory right (though a contractual right might be denied in very plain cases of abuse).

The court did not make detailed orders on each pleaded category but announced these principles, directed the parties to apply them to the disputed categories and return on limited issues including costs.

The court held that the claimants are entitled in principle to inspect partnership books and records sufficient to enable them to examine the state and prospects of the partnership. This entitlement is not confined to summary accounting records where primary documents are necessary to establish assets, liabilities or valuations; it is subject to relevance and confidentiality limits (for example clause 5.2 of the Management Agreement) and does not extend to purely internal managerial documents unrelated to partnership affairs. The court set out a functional test for what constitutes partnership "books, records and information" and directed the parties to apply those principles to the categories of documents in dispute and to return for determination of residual matters.