The High Court has refused to grant a Spanish investor immediate judgment for €3.24 million against an Irish investment fund in litigation arising from the collapse of Bernard Madoff’s investment business.
Consulnor Gestion SGHC S.A. sought summary judgment against Optimal Multiadvisors Ireland plc for €3,241,474.90. Summary judgment allows a court to decide a debt claim without a full trial where the defendant has no real arguable defence.
Consulnor had submitted redemption requests in September 2008 for shares in Optimal’s U.S. equity euro sub-fund. The relevant dealing day was 1 December. The fund’s net asset value was calculated on 10 December and published the following day.
On 11 December 2008, however, news emerged that Bernard Madoff had been arrested in New York over an alleged Ponzi scheme. All or nearly all of the relevant sub-fund’s assets had ultimately been invested through Bernard L. Madoff Investment Securities. At the time, about €411.5 million of the sub-fund’s assets were under management with that firm.
Optimal’s directors met urgently and on 12 December resolved to suspend redemptions, including those for the 1 December dealing day. Consulnor argued that its right to payment had already crystallised and could not be undone by a later suspension.
Mr Justice Kelly held that Optimal had crossed the relatively low threshold required to resist summary judgment. Its articles of association arguably allowed the suspension power to extend to the full redemption process, including payment, where funds could not be repatriated or valuations could not fairly be calculated.
The judge also treated a recent Cayman Islands Court of Appeal decision as persuasive support for that interpretation.
He did not finally decide whether Optimal was legally right. Instead, he found the defence sufficiently arguable to require a full hearing.
The summary judgment application was therefore refused. The case was adjourned for plenary trial, with Optimal undertaking not to make payments to shareholders or former shareholders without notice to Consulnor.