The Supreme Court has dismissed an appeal by SPV Osus Limited, upholding rulings that an assignment of claims arising from the collapse of Bernard L. Madoff Investment Securities LLC could not be enforced in Ireland.
The appeal concerned proceedings brought by SPV Osus against HSBC Institutional Trust Services (Ireland) Limited, HSBC Security Services (Ireland) Limited, Optimal Investment Services S.A. and Banco Santander S.A. The company relied on a 2011 assignment from Optimal Strategic US Equity Limited, which transferred claims connected with investments through Madoff’s business.
The assignment was part of a wider arrangement intended to let investors in the Strategic Series realise value from their investment through the secondary market for claims in the Madoff bankruptcy. SPV Osus later came under the control of investors who acquired about 93% of its shares. Proceedings against the defendants began in December 2014.
The defendants argued that the assignment was void under Irish law because it amounted to an impermissible transfer of a bare right to litigate. The High Court accepted that argument and dismissed the proceedings in limine. The Court of Appeal upheld that decision. The Supreme Court considered the circumstances in which Irish law recognises assignments of causes of action and whether the assignment in this case qualified.
In a judgment delivered on 31 July 2018, O’Donnell J. said an assignment of a right to litigate is unenforceable unless supported by a genuine commercial interest. The judgment recognised that some assignments can be legitimate, including where a claim is connected to an existing property or commercial interest. But the court found that the claimed interest here arose from the same transaction as the assignment and did not exist independently beforehand.
The court also considered that the assignment was designed to permit onward transactions that would give third parties control of, and potential benefit from, the claims. The fact that SPV Osus was initially connected to the assignor through common ownership did not alter the result, given the purpose and subsequent transfer of control.
The Supreme Court dismissed the appeal and upheld the High Court decision. It did not determine the underlying allegations against the defendants; the ruling addressed whether SPV Osus could rely on the assignment to pursue those proceedings.