The High Court has ordered HSBC Institutional Trust Services (Ireland) Limited to make discovery of two categories of documents held by HSBC entities and personnel in New York and Hong Kong in litigation brought by Thema International Fund PLC over investments placed with Bernard Madoff as sub-custodian.
In a judgment delivered on 27 July 2012, Mr Justice Charleton granted Thema’s motion on notice for discovery under a 2010 order. The order is limited to protocols and guidance used to select and monitor sub-custodians, and documents concerning the selection, appointment and monitoring of the Madoff entities for the Thema and Landmark funds. It includes documents specific to those entities or prepared because of their alleged roles as broker, sub-custodian, investment manager or adviser.
The dispute concerned whether the defendant could be required to obtain relevant records from other HSBC group companies. The defendant argued that discovery already made from several jurisdictions was sufficient, that the requested order exceeded the court’s powers and proportionality limits, and that compliance could be burdensome. Thema submitted that the records were relevant, necessary and within the court’s power to order.
The judge said the motion sought a limited class of documents, rather than another million pages. He considered them relevant to whether there were warning signs, or reassurances, about Madoff and his entities, and to the decision to appoint or retain them as sub-custodian. Emails shown to the court included references to concerns about segregated accounts, due diligence and risk, as well as material recording satisfaction after a review. The judgment did not determine whether those matters established liability or resolved Thema’s claim.
The court held that the amended discovery rule’s use of “procurement” had a meaning distinct from possession or legal power to obtain documents. On the evidence before it, the judge found no reason to suppose the defendant could not obtain the limited records from other HSBC entities on request. He concluded that the requested documents were relevant, necessary and shown probably to exist.
The court therefore ordered discovery in the terms of the motion, subject to its stated limits: HSBC entities and personnel in New York and Hong Kong, and categories 1 and 2. The judgment did not decide the underlying claim. It noted that the target date for the trial was February 2013.