A banker was 'floored' to find out he had not become a partner in a law firm, as his agreement with the company 'remained in draft', a court has heard. 

Gary Keane had been global head of collateral operations projects with Bank of America Merrill Lynch before he joined Document Risk Solutions Limited (DRSL) which provided alternative legal services.

The company had been founded by four solicitors - David Sargen, Jonathan Martin, Sean MacGloin, and Michael Beaton. Sargen, Beaton and Martin had met when working for Barclays Capital. MacGloin had been manager of the legal department of Mitsui’s energy risk management arm.

The Court of Appeal heard that the possibility of Keane joining DRSL was discussed in early 2012 and emails were exchanged discussing a plan which would grant him equal parity of equity with the existing directors after 12 months.

However, Sargen, Beaton, MacGloin (in a witness statement made before his death in 2021) and Martin all gave evidence to the effect that, at a meeting on May 10 2012, Keane said he did not want shares in DRSL.

Sargen said in his witness statement: 'I don’t recall his precise words but I do remember his response was both quick and unequivocal. I remember being surprised by this as, even though I appreciated that by him taking shares there might be an income tax charge arising for Gary which he would need to pay, not taking shares would mean he would have no say in the corporate decision making of DRSL in the future.'

In August 2012, Sargen sent Keane and his co-founders drafts of a partnership agreement for a partnership called 'DRS Partnership' with Sargen, Beaton, MacGloin and Martin as the partners.

Keane was said to have responded: 'To be honest not had chance to go through …. I’m presuming everyone else is same or in agreement?'

The court heard 'discussions were not concluded' and the documents 'remained in draft'.

By the end of 2016, deteriorating relationships led to the parties discussing Keane’s departure and DRSL agreed to pay Keane the 'interest purchase price' for his interest.

Keane said in a witness statement: 'During my exit negotiations, my partners informed me that the only remaining equity I held in the business was a 4.5% share in the LLP. I was floored. I had gone from believing I owned 20% of the business to being informed that in reality I owned 4.5% of the LLP.'

The LLP was dissolved on May 7 2019 and Keane sought a declaration that he and the founders had owned it in partnership, which Insolvency and Companies Court Judge Jones agreed.

However, on appeal, Lord Justice Newey decided the judge was not entitled to find that Keane became a partner in the partnership relating to the DRSL shares, as there was no evidence to support that conclusion.

Newey said: 'It is clearly the case that, in 2012, Messrs Sargen, Beaton, MacGloin and Martin would have been happy for Mr Keane to accede to the DRSL shares partnership. In fact, at least Mr Sargen and Mr Beaton were surprised when Mr Keane declined to take DRSL shares at the meeting on May 10 2012, and no one raised any objection to partnership documentation substantially in the form of the drafts circulated in August being executed. 

'In the event, however, the discussions “were not concluded”, the documents “remained in draft” and no further steps were ever taken to make Mr Keane a partner.'

The appeal was allowed.

 

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