Investors pursue a claim for damages personally against directors
In The First Bespoke Limited Partnership v (1) Demetrios Hadjigeorgiou and others  EWHC (Ch) the claimant claimed substantial damages against the defendant members of related limited liability partnerships for breaching duties of care in respect of due diligence work.
The claimant was an unregulated collective investment scheme. Investors would provide funds and become a member of the claimant, which would then use a special purpose vehicle (SPV) to make secured short-term trade finance facilities to borrowers identified and checked by the defendants. By a loan agreement, the claimant agreed to provide the SPV with a facility for the purpose of making loans to a borrower that had been introduced by the defendants. The defendants controlled the SPV, which carried out the due diligence on the borrower.
The transactions that the borrower financed were fictitious and the security that it had provided had proved worthless. The borrower defaulted and the claimant lost the amount of the facility.
The claimant issued proceedings and its agent produced a witness statement, stating that although he had known of the defendants' positions within the partnerships, he had dealt with them personally and on the basis of their trust and expertise. He relied on references by the defendants in correspondence to words such as "we" to show that he was dealing with them in a personal capacity. With one exception, the defendants had all communicated via their partnership email accounts, and letters were sent on the partnerships' letterheads. The defendants' case was that they had not assumed personal responsibility for locating suitable borrowers, which was the responsibility of the partnerships, and that the SPV was responsible for the remaining services.
HHJ Raeside QC (sitting as a High Court Judge) held that it was perfectly plain that the defendants had only assumed responsibility through the limited liability partnerships. The situation was not analogous to Fairline Shipping Corp v Adamson  Q.B. 180 where a letter written in the first person on personal letterhead confirming an arrangement in personal terms had been a special fact for finding that an individual had assumed personal responsibility, despite the corporate veil, Fairline Shipping Corp v Adamson considered. The claimant's argument was unsustainable. The agent had always dealt with the partnerships. The test was not simple reliance on fact, but whether the claimant could reasonably have relied on an assumption of personal responsibility, which it could not, Williams v Natural Life Health Foods Ltd  1 W.L.R. 830 followed. The claim was dismissed.