Helen Mary Ross v Andrew John Phillips

A declaration by a limited liability partnership transferring substantially all its assets and bringing about its dissolution changes the nature of its business. Under regulation 7(6) of the Limited Liability Partnerships Regulations 2001, such a change requires the consent of all members unless displaced by a valid LLP agreement. A purported agreement must be pleaded and proved; an unpleaded agreement cannot be relied upon at trial. Where the transfer was concealed, limitation may be postponed under section 32 of the Limitation Act 1980. A later financial-provision case does not create issue estoppel or Henderson abuse where ownership was not necessarily determined and the later derivative claim could not realistically have been brought in the earlier proceedings.

The claimant brought a derivative claim on behalf of HRP Complete Solutions LLP, the Old LLP, concerning three properties previously held beneficially by it. In 2015, a declaration purported to transfer the beneficial ownership of the properties to a new LLP controlled by the first defendant.

The claimant argued that the declaration required unanimous consent because it changed the nature of the Old LLP’s business, and that the apparent appointment of a third member was invalid. The defendants relied on alleged LLP agreements, issue estoppel, Henderson v Henderson abuse, and limitation. The central questions were whether the declaration was valid, whether the claim was barred, and who beneficially owned the properties.

1. Declaration invalid. Regulation 7(6) of the Limited Liability Partnerships Regulations 2001 required unanimous consent for a change in the nature of the Old LLP’s business, subject to any different LLP agreement. The Old LLP’s business was substantially the holding of the properties. Transferring substantially all its assets to a new LLP, followed by its striking off and dissolution, was a fundamental change in that business. The declaration was made without the claimant’s consent and was therefore invalid.
2. No valid alternative LLP agreement displaced regulation 7(6). The alleged comprehensive signed agreement was not pleaded, was inconsistent with the pleaded case, was not put to the claimant in cross-examination, and was unsupported by the evidence. The purported oral and unsigned written agreement was likewise unproved.
3. The declaration was invalid on an additional ground. The alleged appointment of the Old Company as a third member was not valid. There was no genuine meeting or decision on 23 October 2014. The claimant’s signature on relevant documents had been obtained by actual undue influence and, insofar as necessary, the minutes were set aside.
4. Beneficial ownership therefore remained with the Old LLP. The court made declarations that the properties were held on trust for the Old LLP. The court did not decide any overreaching issue concerning the transfers to Bond 58 because that case had not been pleaded or argued; it observed that the apparent absence of valuable consideration would likely have been fatal to such an argument.
5. The claim was neither barred by issue estoppel nor abusive under Henderson v Henderson. The Family Court proceedings did not necessarily determine ownership, were brought in a different capacity and context, and did not provide a realistic or proper forum for the derivative claim. The ownership issue was central here but only one of many matters relevant to the earlier lump-sum order.
6. Section 21(3) of the Limitation Act 1980 supplied the pleaded primary limitation period. Section 32(1)(b) postponed time because the attempted transfer and its documentary background had been concealed until the claimant saw the defendant’s completed Form E in late 2018 or early 2019. The claim was consequently not statute-barred.
7. Under the default rule in regulation 7 of the Limited Liability Partnerships Regulations 2001, the members were entitled equally to the capital and profits on winding up. The claimant and first defendant were therefore entitled equally to the properties.