“21 Entitlements of Former Members 21.1 From his Leaving Date, a Former Member shall cease to be entitled to share in the profits of the LLP (other than as expressly specified in this Clause 21), and shall cease to be entitled to make drawings on account of profits pursuant to clause 8.3. On or promptly after the Leaving Date, the Voting Percentage of the Former Member shall be allocated by the Managing Member on a pro rata basis to all Members who were Members of the LLP at the respective Entry Date (as defined in clause 9.3 (c)) of such Former Member. 21.2 As soon as reasonably practicable after the Accounting Reference Date following the Former Member’s Leaving Date, the LLP shall calculate the amount of profit (“the Allocated Profit”) that would have been allocated to the Former Member under clause 8.2 in respect of the Accounting Period ending on that Accounting Reference Date (the “Relevant Accounting Period”) had he not ceased to be a Member, and shall apportion the Allocated Annual Profit on a time basis between: (a) the period from and excluding the previous Accounting Reference Date to and including the Former Member’s Leaving Date (“the Apportioned Profit”); and (b) the period from and excluding the Former Members’ Leaving Date to and including the Accounting Reference Date following the Former Member’s Leaving date (“the Reserved Profit”) 21.3 …[Bad Leaver clause]… 21.4 Save as otherwise expressly agreed between the LLP and any Member or any Former Member, in the event that the Former Member is a Good Leaver and so long as the Former Member remains a Good Leaver: (a) if the Aggregate Drawings paid to any Former Member during the Relevant Accounting Period exceeds the Apportioned Profits, the Former Member shall, within one month after the annual accounts for the Relevant Accounting Period are approved by the Members, repay such excess to the LLP together with interest on the excess at an interest rate equal to the base lending rate from time to time of the Bank; (b) if the Apportioned Profits exceed the Aggregate Drawings paid to any Former Member during the Relevant Accounting Period, such excess shall be distributed to the Former Member as soon as reasonably practicable after the annual accounts for the Relevant Accounting Period are approved by the Members; (c) such Former Member shall be entitled to receive the amount of such Former Member’s Capital Contribution other than his Regulatory Capital Contribution, which shall be paid in accordance with clause 6.4) made pursuant to clauses 6.1 and 6.2 within 12 months from the relevant Leaving Date. (d) .. [Interest Buy Out Clause ] … (e) save as aforesaid, the Former Member (or his personal representatives) shall not be entitled to any share in the profits of the LLP or distributions made by LLP, and shall not have any right, interest or entitlement in the LLP” 25. Variation 25.1 Subject to clause 14, this agreement may be varied only an agreement in writing signed by or on behalf of each Member.” 29. Entire Agreement 29.1 This agreement and the documents referred to or incorporated in it constitute the entire agreement between the parties relating to the subject matter of this agreement and supersede and extinguish any prior drafts, agreements, undertakings, representations, warranties and arrangements of any nature whatsoever, whether or not in writing, between the parties in relation to the subject matter of this agreement…” (a) the period from and excluding the previous Accounting Reference Date to and including the Former Member’s Leaving Date (“the Apportioned Profit”); and (b) the period from and excluding the Former Members’ Leaving Date to and including the Accounting Reference Date following the Former Member’s Leaving date (“the Reserved Profit”) (a) if the Aggregate Drawings paid to any Former Member during the Relevant Accounting Period exceeds the Apportioned Profits, the Former Member shall, within one month after the annual accounts for the Relevant Accounting Period are approved by the Members, repay such excess to the LLP together with interest on the excess at an interest rate equal to the base lending rate from time to time of the Bank; (b) if the Apportioned Profits exceed the Aggregate Drawings paid to any Former Member during the Relevant Accounting Period, such excess shall be distributed to the Former Member as soon as reasonably practicable after the annual accounts for the Relevant Accounting Period are approved by the Members; (c) such Former Member shall be entitled to receive the amount of such Former Member’s Capital Contribution other than his Regulatory Capital Contribution, which shall be paid in accordance with clause 6.4) made pursuant to clauses 6.1 and 6.2 within 12 months from the relevant Leaving Date. (d) .. [Interest Buy Out Clause ] … (e) save as aforesaid, the Former Member (or his personal representatives) shall not be entitled to any share in the profits of the LLP or distributions made by LLP, and shall not have any right, interest or entitlement in the LLP”
“While the LLP Agreement required the parties to perform services for [RCA], it did not specify the compensation for each year that each partner was entitled to receive in return for the services rendered. Instead, the partners from time to timeagreed defined compensation packages for each partner and for each calendar year for the services provided pursuant to the LLP Agreement. Each compensation package comprised (i) an annual base salary (also described as current pay); (ii) an annual deferred salary and (iii) a specified bonus for the relevant year.”
“[The 2016 LLPA] and the [2020 LLPA] didin fact specify the method of calculation of the remuneration for members as explained in paragraph 9 of this Defence. For the reasons given in paragraph 14 of this Defence, base compensation reflected the Claimant’s Fixed Share and anything other than base compensation required a determination of sufficient profit for distribution.”
“The very essence of the LLP was therefore typical to an 1890 Act partnership i.e. persons carrying on a business in common with a view to profit. Members would only receive remuneration in the event of profit and in accordance with the level of profit.”
“none of the components of the compensation package was agreed to be subject to any conditions.”
“On a proper construction of the partners’ agreements alternatively as an implied term of the same (such term to be implied by reason of its obviousness and/or to give efficacy to the agreements), alternatively as a matter of law, the Claimants’ entitlement to deferred compensation and/or bonuses for each year crystallised: a. Upon Mr Assimakopoulos’ approval of the Claimants’ compensation package (which incorporated such deferred compensation and bonuses) for the relevant year; and/or b. Immediately, or alternatively within a reasonable period, following a demand by the Claimants for payment; and/or c. By16 March 2022 at the latest i.e. the date the First Claimant ceased being a partner in the First Defendant.” a. Upon Mr Assimakopoulos’ approval of the Claimants’ compensation package (which incorporated such deferred compensation and bonuses) for the relevant year; and/or b. Immediately, or alternatively within a reasonable period, following a demand by the Claimants for payment; and/or c. By16 March 2022 at the latest i.e. the date the First Claimant ceased being a partner in the First Defendant.”
“outstanding payments”, “unpaid” sums, and “arrears due to RCA partners”
“The current schedule (as of20 September 2021 ) shows that as of end of 2021 [Mr Klaturov] will be owed EUR 1,257,028”
“Although the formation of contract is conventionally analysed in terms of whether a contractual offer was accepted, the law does not require rigorous compliance with an analysis along these lines. Nor does it require that any particular communication or act must in itself manifest that the party intends to contract: the court will, if appropriate, assess a person's conduct over a period and decide whether its cumulative effect is that he has evinced an intention to make the contract.”
“Mr Assimakopoulos, Mr Jones and I had numerous conversations both in person and over the phone, where we agreed that these amounts were contractual entitlements and that the agreed amounts were unconditionally owed. We did not, however, insist on immediate payment. We shared the understanding that RCA would pay the deferred amounts by the earlier of (i) RCA receiving additional income, which would be used to discharge the deferred liabilities by way of pro-rata payments to partners; or (ii) a partner leaving RCA in which case he would be entitled to all of his outstanding compensation on his departure date”
“Despite some imprecision and infelicity in the language of the pleading, the P/C and RFI response are sufficiently clear in setting out the factual basis for the allegation that there was a consensual contractual agreement reached that the claimed amounts would be paid. P/C paras 19-20 and RFI Response to request (e) set out the factual allegations with clarity as to how and when agreement was reached. Although the RFI Response to Request (d) disavowed an oral agreement, the averments of an agreement by conduct might as easily have been characterised in law a oral agreements subsequently evidenced in writing because the conduce alleged involved oral agreements… Subject to arguments on when the payment was due and whether it was subject to profitability, there was no proper room for argument that the basis of the contractual claim was sufficiently identified in the pleading and supported by factual evidence which could not be rejected on a summary basis”
“It follows from this that (absent a contrary agreement) the rights of a member, such as the rights to share in the profits of the LLP, come to an end when he ceases to be a member; and this cessation of rights applies just as much to the right to share in capital profits or a member’s ‘equity’, as it does to the right to share in annual trading profits.”
“Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the members of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its members, shall be governed— (a)by agreement between the members, or between the limited liability partnership and its members, or (b)in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).”
“RCA would pay the deferred amounts by the earlier of (i) additional income being received, which would be used to discharge the deferred liabilities by way of a pro-rata payments to the partners or (ii) a partner leaving RCA, in which case he would be entitled to all of his outstanding compensation.”
“When I am raising capital for Revetas, every investor wants to know about (and expects to be told about) the alignment of interest between the partners and them. When this question inevitably comes up, I tell them we align with them by investing alongside with them and by having a deferred (i.e. contingent element) to our compensation so that parts of our compensation are only unlocked when we create value and achieve success for our investors.”
“historically we have never paid deferred compensation or bonuses to partners using our recurring fees to RCA, and we have only ever made payments through the extraordinary acquisition and/or promote fees (with the exception of one time in 2019 which I discuss at paragraph 55) because that is the model that I ensured Revetas was founded on”
“We start by recalling that the judge read Leggatt J's statements in Gestmin v Credit Suisse and Blue v Ashley as an ‘admonition’ against placing any reliance at all on the recollections of witnesses. We consider that to have been a serious error in the present case for a number of reasons. First, as has very recently been noted by HHJ Gore QC in CBX v North West Anglia NHS Trust [2019] 7 WLUK 57, Gestmin is not to be taken as laying down any general principle for the assessment of evidence. It is one of a line of distinguished judicial observations that emphasise the fallibility of human memory and the need to assess witness evidence in its proper place alongside contemporaneous documentary evidence and evidence upon which undoubted or probable reliance can be placed. Earlier statements of this kind are discussed by Lord Bingham in his well-known essay The Judge as Juror: The Judicial Determination of Factual Issues (from The Business of Judging, Oxford 2000). But a proper awareness of the fallibility of memory does not relieve judges of the task of making findings of fact based upon all of the evidence. Heuristics or mental short cuts are no substitute for this essential judicial function. In particular, where a party's sworn evidence is disbelieved, the court must say why that is; it cannot simply ignore the evidence.” (per Floyd LJ at §88): b. At §89, Floyd LJ Kogan v Martin emphasised that the reasoning in Gestmin was in the specific context of a document-heavy commercial case. By contrast, in Kogan, the relevant witnesses were private individuals who lived together for much of the time such that it was inherently improbable that their communications would be fully recorded. Mr Weale submitted that the same principles apply to business partners who share offices. c. In NatWest Markets v Bilta[2021] EWCA Civ 680 , the Court of Appeal emphasised (at §51-52) that in some cases there will be critical events which are undocumented and that: “Faced with documentary lacunae of this nature, the judge has little choice but to fall back on considerations such as the overall plausibility of the evidence; the consistency or inconsistency of the behaviour of the witness and other individuals with the witness's version of events; supporting or adverse inferences to be drawn from other documents; and the judge's assessment of the witness's credibility, including his or her impression of how they performed in the witness box, especially when their version of events was challenged in cross-examination.”
“I think it reflects a sense of generosity and fairness in Eric’s character, which I believe is genuine and on balance is acceptable… It’s also a slightly old fashioned sense of ‘largesse’ he has, which is consistent with his repeated use of the word ‘family’ to describe the team (including you and me)”
“good”, “great” and “awesome” or “survive”, “good” and “great”
“The way it should work is that I receive my salary at the GmbH level and I don’t have a fixed share at the LLP, but only profit participation” iii. The email 09.02.16 from Mr Jones to Mr Klaturov: “We all receive a fixed share out of the available profit and then any residual profit is allocated in the profit-sharing percentages” b. When RCA’s reviewed the proposed LLP membership deed she explained to Mr Klaturov that “…anything you are paid from RCA is paid as an ownership interest rather than as some form of recompense for services so if you are happy to proceed on this basis then the Deed looks ok to us”
“The question whether an adverse inference may be drawn from the absence of a witness is sometimes treated as a matter governed by legal criteria, for which the decision of the Court of Appeal in Wisniewski v Central Manchester Health Authority [1998] PIQR P324 is often cited as authority. Without intending to disparage the sensible statements made in that case, I think there is a risk of making overly legal and technical what really is or ought to be just a matter of ordinary rationality. So far as possible, tribunals should be free to draw, or to decline to draw, inferences from the facts of the case before them using their common sense without the need to consult law books when doing so. Whether any positive significance should be attached to the fact that a person has not given evidence depends entirely on the context and particular circumstances. Relevant considerations will naturally include such matters as whether the witness was available to give evidence, what relevant evidence it is reasonable to expect that the witness would have been able to give, what other relevant evidence there was bearing on the point(s) on which the witness could potentially have given relevant evidence, and the significance of those points in the context of the case as a whole. All these matters are inter-related and how these and any other relevant considerations should be assessed cannot be encapsulated in a set of legal rules.”
“This factual proposition is important, because it establishes that Mr Klaturov must have reached an agreement in respect of his remuneration that was entirely independent of any rights which he later acquired qua partner. It follows that such agreement must have been independent of the LLP Agreement”
“We will use the residual cash in Luxembourg to pay for the car, my bike and a gift to Eric. This leaves around€269,000 in Luxembourg which will be paid to us some of the deferred comp pro rata so your share will be around€54,000 .”
“The current schedule shows that as of end 2021 [Mr Klaturov] will be owed€1,257,028 .”
“ENA, SIJ and KMK have always been paid at below market rates, as agreed with the founder RHL shareholders in the original business plan. The underpayments are being accrued and might be paid at a future date.”
“We also agreed to include interest on deferred portion of partners’ compensation (i.e. deferred and bonuses) to recognise the time value of pay, as we work on deals with a lifecycle spanning many years.”
“The purpose of this Memorandum of Understanding (‘MOU’) is to set out the terms agreed between ENA and RCA under which ENA is to be compensated by RCA”
“Within six months of the date of this MOU, RCA will use its best endeavours to make amendments to the Partnership Agreement of RCA such that KMK is admitted as a Member. KMK will, on the date of admission and on a pro rata basis, be entitled to the greater of 5% of the annual audited profits of the LLP and the current compensation received by KMK for that year/period including any bonus or performance payments made or applicable for that year/period”
“First… the implication of a term was ‘not critically dependent on proof of an actual intention of the parties’ when negotiating the contract… one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them… thirdly, it is questionable whether Lord Simon’s first requirement, reasonableness and equitableness, will usually, if ever, add anything Fourthly… I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied… Fifthly, if one approaches the issue by reference to the officious bystander, it is ‘vital to formulate the question to be posed by [him] with the utmost care’… Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of ‘absolute necessity’, not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon’s second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.”
“It is of course impossible to imply a contract any term or condition inconsistent with tis express provisions, or with the intention of the parties as gathered from those provisions. The first thing, therefore, in every case is to compare the term or condition which it is sought to imply with the express provisions of the contract and with the intention of the parties as gathered from those provisions and ascertain whether there is any inconsistency”
“Where a contract does not expressly, or by necessary implication, fix any time for the performance of a contractual obligation, the law usually implies that it shall be performed within a reasonable time.”
“At no point in my discussions was there any suggestion that the deferred amounts or bonuses would not be included, nor that they were not contractual liabilities owed to me”
“81.5. … the Deferred Compensation payments were a contractual liability of RCA… 81.6. … Such compensation formed part of the Revetas Management Team’s remuneration payable by RCA and, therefore, was a fee, cost and/or expense of RCA for the purposes of clause 5.1.2 of the Founder LPA… …… 81.10. The Deferred Compensation payments were a fee, costs and/or expense reasonably and properly incurred by RCA for the purposes of clause 5.1.2 of the Founder LPA… 81.15. … the Revetas Management Team agreed to defer part of their compensation each year until there was sufficient distributable funds from Fund I Investments to pay it. The Revetas Management Team were under no obligation to do so, and could have been paid their deferred compensation from the remaining amounts available to be drawn down on the RHL Loan notes, but agreed to the deferral in line with their commitment to investments and investors. Those deferred amounts constituted the Deferred Compensation Payments. 81.16. RCA agreed with the Revetas Management that 8% per annum interest would accrue on the Deferred Compensation Payments. As the RHL Loan Notes would have accrued 8% per annum interest if further drawn upon the pay the Deferred Compensation Payments, it was considered commercially reasonable for that rate of interest to apply to the Deferred Compensation Payments.”
“Further, the Claimants are entitled to, and hereby seek: (i) a determination of the amount (if any) payable to them by way of their entitlement to profit share pursuant to clause 8 … ; (ii) and payment of such as is determined”
“Paragraph 34A of the POC is denied. [1] The Claimants are not entitled to a profit share unless and until, pursuant to clause 8 of the 2016 LLPMA and the 2020 LLPMA, there are “profits of the LLP reasonably determined by the LLP to be in the nature of income profits or operating profits” that were greater than the Fixed Share payments. [2] There is no identification of any time period in paragraph 34A, nor any allegation of breach by abuse of discretion. [3] There is no entitlement to a “determination” absent an allegation of breach. [4] In any event, there are no such profits for the time periods in issue in this action, which is precisely why Deferred Compensation and Bonus have not been paid”