Have you been true and full? A limited partner's right to information

The Grand Court of the Cayman Islands has recently released for publication a decision in Dorsey Ventures Limited (Plaintiff) and XIO GP Limited (Defendant) (FSD 38 of 2018, unreported 22 October 2018) which provides some welcome clarification regarding the extent of a limited partner's statutory rights to information in a Cayman Islands exempted limited partnership. The Court considered the rights of a limited partner to receive information in respect of the underlying partnership through section 22 of the Exempted Limited Partnership Law (2018 Revision) (the "ELP"):

"Subject to any express or implied term of the partnership agreement, each limited partner may demand and shall receive from a general partner true and full information regarding the state of the business and financial condition of the exempted limited partnership."

The matter concerned XIO Fund I LP (the "Fund"), an exempted limited partnership registered under the ELP. Dorsey Ventures Limited (the "LP") is a limited partner in the Fund and XIO GP Limited (the "GP") its general partner. The LP, now controlled by insolvency practitioners as professional directors, applied for an order that the GP deliver up certain information and documentation regarding the financial condition of the Fund with reference to the rights under section 22 of the ELP.

The application was made in the context of a wider dispute between two individuals as to the ultimate beneficial ownership of the LP, a dispute which is the subject of an ongoing arbitration in Hong Kong. There are substantive related proceedings before the Grand Court of the Cayman Islands.

In refusing the LP's requests and in response to the application, the GP argued that:

  1. Section 22 is subject to any express or implied term of the relevant Limited Partnership Agreement (the "LPA");
  2. Clause 15.2 of the LPA required the GP to maintain records of books and accounts;
  3. Clause 15.3 provided for the LP to receive the Fund's annual audited accounts and unaudited quarterly accounts by certain dates, or otherwise as soon as practicable;
  4. As a matter of construction, these contractual provisions expressly exclude the general right to receive information under section 22; and

Alternatively, a term should be implied to this effect to give business efficacy to the LPA (applying Marks and Spencer Plc v BNP Paribas Securities Services trust Co (Jersey) Ltd [2016] AC 742 ("M&S v BNP").

The Court ultimately made the order sought by the LP. In doing so Justice Mangatal held that:

  1. The relevant clauses in the LPA provide for the maintaining of records of books and accounts and the furnishing of that information;
  2. When read in conjunction with section 21 of the ELP (which deals specifically with 'accounts'), the right to receive "true and full information" under section 22 plainly contemplates a broader class of information than merely audited and unaudited accounts;
  3.  As a result, a reasonable man (with background knowledge of the parties) could not have understood the parties to have intended to exclude the rights under section 22, absent express language in the LPA to that effect; 
  4. M&S v BNP provides that a term can only be implied if, without the term, the contract would lack commercial or practical coherence. That was not the position here. The LPA could not properly be said to lack commercial or practical coherence and could not be construed as excluding the broad right to information under section 22. 

The judgment makes it clear that any fund wanting to restrict or exclude the LP's right to receive "true and full information" regarding the state of the partnership will have expressly to do so in the LPA.

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