'Harsh' Result In Hedge Fund Dismissal Case

In a recent hedge fund case (Ilott v Williams [2013] EWCA Civ 645), the Court of Appeal delivered a judgement which it admitted entailed "harsh results" for the Appellant.

Mr Ilott, was appealing against a decision to dismiss his claim for a share of the profits in an asset management business following his dismissal.

Mt Ilott and three others had decided to establish a new asset management business together. They eventually joined BlueCrest LP. BlueCrest's general partner issued a Side Letter, recording the agreed division of profits, promising to secure that Mr Ilott and his colleagues would become limited partners in BlueCrest and scheduling outline terms for the new business and the calculation of profits.

On 26 November 2009, four days before the end of the business's financial year, Mr Ilott was served with notice of removal as a member of BlueCrest. He received no distribution of profits for that financial year. Mr Ilott brought a claim for his share of the profits. The High Court had initially found that, amongst other things, BlueCrest was not liable to Mr Ilott under the terms of the Side Letter.

Mr Ilott appealed. The Court of Appeal considered a number of important issues, including whether Mr Ilott could recover his share of the profit from BlueCrest on the basis of the Side Letter. However the Side Letter contained the following Proviso:

"Provided that each of you remains a limited partner (and has not served the Partnership with notice of your resignation nor received a Notice of Removal) at all relevant times and subject to sufficient profits being available in the Partnership and the terms of this letter..." (underlining added)

Mr Ilott received notice of his removal as a partner four days before the end of the partnership's financial year. The court considered whether the "relevant times" for the purposes of this Proviso included either the last day of the current financial year, or the date on which the profits for that year were allocated to the individual partners. Mr Ilott argued that...