The High Court deferred a decision on when to hear questions about the possible recognition in Ireland of a proposed US class-action settlement involving investors in Thema International Fund plc.
In a judgment delivered on 4 August 2011, Mr Justice Clarke said the court could not decide in the abstract whether the settlement should be recognised without knowing what effect HSBC Institutional Trust Services (Ireland) (HTIE) would argue it should have on the Irish proceedings. The judgment did not determine recognition, enforceability, liability or investor standing.
The proposed partial settlement concerned the US federal case Davis v Benhasset et al in the Southern District of New York. Under the terms then proposed, money would be made available by HTIE and related companies to a class of Thema investors who filed valid claims, with some funds reserved to support further proceedings. Investors could opt in or out; those who did neither could be treated as having assigned certain interests under the proposal. The terms and their possible effects remained subject to the US approval process.
The Irish case was part of wider litigation connected with the Madoff matter. HTIE intended to argue that individual investors lacked standing to bring their own proceedings, relying on the rule in Foss v Harbottle. The judge said that question remained to be decided. He also described a possible complication if a US settlement affected recovery by Thema in the event that the fund succeeded against HTIE but individual investors could not pursue claims themselves.
HTIE had assured the Irish court that investors who opted out would remain free to continue their Irish proceedings. The judge said he saw no real problem for those who opted out, and considered that HTIE would be estopped from later contradicting its assurance. He identified investors who took no position as a potential concern if the settlement were recognised and affected their interests through a recovery by Thema.
The judgment’s procedural direction was that HTIE should, as soon as practicable after the settlement terms were finalised for preliminary approval, file a document explaining the effects it said an approved settlement would have on the Irish proceedings. The explanation could be conditional, but should address any claimed effect on calculations. If HTIE did not file it, the judge’s stated intention was to leave the issues to trial, potentially as a module in a modular trial.
After the judgment was finalised, the court learned that HTIE had changed its position and now joined Thema in seeking an Irish determination before a possible US fairness hearing. The judge said the process he had outlined still applied, but an intermediate hearing on timing was no longer necessary. He aimed to accommodate the parties in early October, subject to procedural directions. The court made no ruling on the settlement’s recognition or enforceability.