Kiril Klaturov & Anor v Revetas Capital Advisors LLP & Anor

In an LLP, members’ financial rights are determined by the LLP agreement and applicable statutory default rules. Where the agreement makes distributions conditional on sufficient distributable profits and a decision to distribute, agreed deferred compensation, bonuses and interest do not become unconditional debts merely because they are recorded in budgets, spreadsheets or minutes.

An entire agreement clause may prevent reliance on collateral contractual arrangements, while a no-variation clause may prevent an alleged agreement by conduct from qualifying the agreed profit-distribution scheme. A term requiring performance within a reasonable time cannot be implied where the obligation is conditional and the proposed term contradicts the express agreement.

The claimants, a former member of Revetas Capital Advisors LLP and his company, claimed unpaid deferred compensation and bonuses for 2018 to 2021. They alleged that annual compensation packages, recorded in budgets, spreadsheets and other documents, created unconditional contractual entitlements independent of the LLP agreements.

The defendants contended that the 2016 and 2020 LLP agreements exhaustively governed members’ remuneration. Under clause 8, amounts beyond fixed drawings were payable only if sufficient profits were available and the LLP decided to distribute them. The claimants also sought an account of any profit share due under clause 8.

The central issues were whether the alleged compensation obligations existed independently of the LLP agreements and whether an account of profits should be ordered.

1. Deferred compensation and bonuses. The claim for €1,199,918 was dismissed. The 2016 and 2020 LLP agreements governed the claimants’ remuneration. Clause 8 provided for fixed monthly drawings and distributions of excess profits. Deferred compensation, bonuses and associated interest were conditional on sufficient distributable profits and a decision by RCA to distribute them.
2. The supporting documents did not create a collateral contract by conduct. Their language, viewed in context, was consistent with financial planning and contingent distributions. The documents could not be used to replace the express profit-distribution structure.
3. Clauses 25 and 29 reinforced that the LLP agreements alone defined the members’ rights and obligations. A collateral agreement for fixed sums would in substance have amended or qualified clause 8, contrary to the contractual scheme.
4. The claimant’s implied-term case failed. A term requiring payment on departure or within a reasonable time would contradict clause 21.4(e), which excluded a former member’s entitlement to profits or distributions except as expressly provided. The reasonable-time principle applies to an unconditional obligation whose time for performance is unstated; it does not apply before a contractual condition has been satisfied.
5. The 2015 MOU was superseded when Mr Klaturov became a member and signed the 2016 LLP agreement. The later Waterfall agreement in principle was consistent with clause 8 but merely regulated the order of distributions and did not establish an unconditional entitlement or resolve the position of a departing member.
6. Profit share. An account was ordered. CPR 25.1(1)(o) confers a general case-management power. It was appropriate because there was a genuine dispute about the determination, allocation, retention and distribution of profits, and about the exercise and communication of relevant discretion. RCA was to be invited to act as accounting party, with the claimants as objecting party.

The judgment was a first-instance decision. It records that an earlier summary judgment or strike-out application was dismissed, and that the separate Buy Out Claim was ordered to be tried later.