Keane v Sargen: High Court dismisses partnership loan claims following accounting dispute

The High Court has provided important clarification on the treatment of loan accounts and repayments within limited liability partnership structures in Keane v Sargen & Ors [2025] EWHC 3147 (Ch), a decision handed down by Deputy Master Linwood on 2nd December 2025.

The proceedings concerned two accounts directed by ICC Judge Jones, whose initial findings of partnership were reversed by the Court of Appeal in February 2023. The claims for accounts, however, remained for determination.

Gary Keane had worked with four solicitors operating a specialist risk management consultancy through Document Risk Solutions Ltd and Derivatives Risk Solutions LLP. In 2013, Member's Interest Purchase Agreements (MIPAs) were executed whereby each member, including Keane, loaned £514,000 to the company to acquire fractions of their interests in the LLP. This formed part of a tax planning arrangement designed to recharacterise income as capital gains.

The structure allowed profits from the LLP to be allocated to the company, which could then use those sums to repay the outstanding loan accounts. Physical payments were made by the LLP on behalf of the company, with proper accounting attribution made at year-end.

The disputed claims

Keane's position shifted substantially during the litigation. Initially claiming £761,754 on the first account and £708,473 on the second, he later argued that the entire £514,000 loan remained unpaid as no formal loan accounts existed within the company's books. He contended that repayments made by the LLP should not count towards discharging the company's obligations.

Additionally, Keane challenged management charges totalling £1,440,758 levied by the company on the LLP, initially alleging fraud and misappropriation. By trial, this claim had collapsed almost entirely, with only a belated challenge to amortisation charges of approximately £30,000 remaining.

The court's analysis

Deputy Master Linwood found Keane's evidence "unsatisfactory in numerous respects", noting he was "verbose and argumentative" and attempted to distance himself from documents and events when they did not suit his case. The court placed little weight on his evidence unless supported by contemporaneous documents.

In contrast, the evidence of the defendants and Rebecca Shields, the independent chartered accountant from Moore Kingston Smith who prepared the accounts, was found to be clear, authoritative and reliable.

The court rejected Keane's contentions for several compelling reasons. First, he had known and understood the tax structure and never objected at the material time when it benefited him financially. Second, the MIPAs required creation of an account, satisfied by the current account as explained in the evidence. Third, Keane had signed off accounts, seen monthly management reports, and could not prove information was kept from him.

Critically, the court held that Keane was "trying to have his cake and eat it". If repayments had not been made through the LLP, he would have been overdrawn by £379,762.

The artificial distinction between the two accounts was also rejected. The Members' Accounts comprised both Capital and Current Accounts and included the Loan Accounts, making the separation unnecessary.

The outcome

Rather than being owed substantial sums, the court declared that Keane actually owed £30,717 to the LLP after accounting for a £165,000 payment on account. His objections to management charges were dismissed entirely, including the late amortisation challenge which the court characterised as a "makeweight submission".

The decision reinforces that parties cannot resile from accounting arrangements they understood and accepted, particularly where they derived tax advantages, simply because later circumstances make alternative characterisations more attractive.