As the fallout from the demise of Dewey & LeBoeuf continues, the High Court has just dismissed an application made by Barclays for a summary judgment over liability for a capital loan made against a former partner of the now-defunct US firm.
The ruling, published on 28 February, dealt with Barclays contention that former Dewey partner Charles Landgraf was liable for the repayment of a loan totalling $486,000 paid into the firm’s account to cover his capital contribution, plus interest.
Landgraf said that his capital account – set at 33% of his annual target compensation – was always maintained and claimed that he only borrowed to inject capital into the firm.
This came after he was approached by management in May 2010 and told about the Barclays Capital Loan Program (BCLP) – a mechanism through which the firm could finance the shortfall in its distributable income by the substitution of bank debt in the capital account. Therefore, he was not liable to repay the loan but rather the firm itself.
Presiding the hearing, Justice Popplewell said that while terms of the loan would appear to make Landgraf liable ‘it is not fanciful to think that, with the benefit of disclosure, the position at trial may well be that Mr Landgraf can show that all concerned, including the bank, knew that the true purpose of the loan was to provide the firm with the liquidity which it required to meet its day-to-day liabilities, not to enable him to make a capital contribution to the firm under the provisions of the partnership agreement.’
TLT, who instructed Fountain Court’s Guy Philipps QC and Adam Zellick, is acting on behalf of Barclays while 4 Stone Buildings’ John Brisby QC and Alexander Cook has been instructed by Candey for Landgraf.
This latest development means a full five-day trial of the action to recover the sum borrowed by Landgraf will take place as scheduled on 1 December.