Aforge Finance S.A.S. & Aforge Gestion S.A.S. v HSBC Institutional Trust Services (Ireland) Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 21 December 2009
• Neutral Citation: [2009] IEHC 565
• Date: 21 December 2009
• Court: High Court
• Docket Number: [2009 Nos. 2938, 3097 & 3098 S]

Aforge Finance S.A.S. & Aforge Gestion S.A.S. v HSBC Institutional Trust Services (Ireland) Limited

[2009] IEHC 565

COMMERCIAL

BETWEEN

AFORGE FINANCE S.A.S. AND AFORGE GESTION S.A.S.

PLAINTIFFS

AND

HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LIMITED

DEFENDANT

AND

BETWEEN

PINET S.A.

PLAINTIFF

AND

HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LIMITED

DEFENDANT

AND

Aforge Finance S.A.S. & Aforge Gestion S.A.S. v HSBC Institutional Trust Services (Ireland) Limited

BETWEEN

AFORGE GESTION S.A.S., ALLOCATION SEQUENCE 1 "C", AXIS 2 SICAV "C", AXIS 3 SICAV "C" AND AXIS 4 SICAV "C")

PLAINTIFFS

AND

HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LIMITED

DEFENDANTS

[2009] IEHC 565

[No. 2938 S 2009]

[No. 3097 S 2009]

[No. 3098 S 2009]

THE HIGH COURT

PRACTICE AND PROCEDURE

Summary summons

Account - Preliminary question to be tried - Whether plaintiff entitled to account as of right - Whether fund or investor entitled to account on foot of fiduciary duty - Whether defendant can establish preliminary question to be tried - Whether custodian has obligation to account beyond obligations set out in UCITS directive - Whether custodian of fund is trustee - Moore v McGlynn [1894] 1 IR 74 followed - Rules of the Superior Courts, 1986 (SI 15/1986), O 2, r 1 & O 37, rr 13-15 - European Communities (Undertakings for Collective Investments in Transferable Securities) Regulations 2003 (SI 211/2003) - Preliminary issue directed (2009/2938, 3097 & 3098SS - Clarke j - 21/12/2009) [2009] IEHC 565

Aforge Finance SAS v HSBC Institutional Trust Services

KALIX FUND LTD & ANOR v HSB INSTITUTIONAL TRUST SERVICE (IRL) LTD UNREP CLARKE 16.10.2009 2009 IEHC 457

RSC O.2 r1(3)

RSC O.37 r13

RSC O.2 r2

RSC O.2 r3

RSC O.37 r1

RSC O.37 r15

RAPID METAL DEVELOPMENTS (AUSTRALIA) PTY LTD v ROSATO 1971 QD R 82

MOORE v MCGLYNN 1894 1 IR 74

RSC O.37 r14

EEC DIR 85/611

WILEY JUDICATURE ACTS IRELAND 1905

RSC 1905 O.15 r1

RSC 1905 O.15 r2

1 Mr. Justice Clarkedelivered on the 21st December, 2009

1. Introduction

2 2 1.1 The above three proceedings are, for all practical purposes, identical. In each case the relevant plaintiffs, whom I will for convenience refer to as "Aforge", have respectively issued a summary summons seeking an account of various matters arising out of the carrying out by the defendant ("HTIE") of its role (to use a neutral term) in the operation of a fund maintained by a company called Thema International Fund plc("Thema").

3 3 1.2 At least so far as general factual background is concerned, these proceedings arise out of the same set of circumstances as I have had to deal with in a series of connected cases ("the Kalix cases"), which were the subject of a judgment in Kalix Fund Limited & Anor v. HSB Institutional Trust Services (Ireland) Limited & Anor [2009] IEHC 457. In general terms these proceedings and the Kalix cases stem from very substantial losses apparently suffered by investors in a fund maintained byThema ("the Thema Fund") arising out of the collapse of the financial empire controlled by Bernard Madoff. As can be seen from the judgment in Kalix, most of the proceedings then under consideration stemmed from claims made by investors in the Thema Fund, which is a UCITS Fund for the purposes of the European Communities (Undertakings for Collective Investments in Transferable Securities) Regulations 2003 ("the UCITS Regulation"). For the reasons set out in my judgment in Kalix it has been determined that a large number of cases should be linked and brought to trial in the manner described in that judgment. A decision has yet to be made as to the precise sequencing of the trial of the various issues which arise in those proceedings.

4 4 1.3 In addition, it is clear that one of the bases on which many of the plaintiffs involved in the Kalix, cases seek to impose a liability on HTIE results from an assertion that HTIE owed fiduciary duties, both to Thema as the operator of the Thema Fund and investors in Thema (such as Kalix itself). Thus one of the issues which will undoubtedly arise at some stage in the course of the Kalix cases is as to whether, in fact, HTIE owes a fiduciary duty to any of the relevant plaintiffs, and if so the extent of any such duty.

5 5 1.4 In substance, Aforge makes a more limited claim in these proceedings. Aforge simply claims to be entitled, at this stage, and in advance of making any claim for wrongdoing against HTIE, to be entitled to an account of various matters arising out of the manner in which monies invested in the relevant UCITS fund were dealt with by HTIE. The stated basis on which Aforge claims to be entitled to an account at this stage is that, it is said, HTIE owes fiduciary duties to Aforge and is, therefore, it is said, obliged, as a matter of right or law, to account to Aforge.

6 6 1.5 In order to identify the stage which these proceedings have reached and the issue which I now have to decide it is necessary to turn to the procedural history of these cases.

2. Procedural History

7 2 2.1 As indicated earlier, summary summonses were issued in July of this year and, appearances having been entered, each of the proceedings was admitted to the commercial list of this Court by order of Kelly J. of the 12 ^th October, 2009. In each case the admission of the proceedings to the commercial list was followed by the issuing of a motion returnable on the 18 ^th November, in which the following relief was claimed:-

"An order or orders pursuant to O. 2, r. 1(3) and/or O. 37, r. 13 of the Rules of the Superior Courts and/or the inherent jurisdiction of this Honourable Court against the defendant for an account in the terms claimed in the special endorsement of claim on the summary summons herein."

8 3 2.2 The accounts claimed in the special endorsement of claim were all in the following form viz:-

9 2 "1. An account of all transactions effected by it in the assets of Thema International Fund plc consisting in part of the amount(s) that had been subscribed by the plaintiffs for participating shares in the capital of Thema International Fund plc.

10 Without prejudice to the generality of the foregoing, the following specific claims are also made against the defendant.

11 3 2(a) An account and valuation of the assets which the defendant or its agent held on behalf of Thema International Fund plc on 28 November 2008, the last date as of which a Net Asset Value calculation of Thema International Fund plc was issued by it to and published by the Irish Stock Exchange and as of 14 December 2008, the date on which Thema International Fund plc announced a suspension of dealings in its shares.

12 (b) An account and valuation of all assets of Thema International Fund plc acknowledged or stated or believed by the defendant to be held on behalf of or at the direction of or to the order of the defendant as at each of 28 November 2008 and 14 December 2008 by any other party, which the defendant had appointed as sub-custodian or otherwise, for the purpose of taking and holding custody of such assets.

13 3. An account of the manner in which at all times since the date of first subscription for participating shares in Thema International Fund plc by the plaintiffs the defendant as custodian of Thema International Fund plc discharged its duty of safekeeping and segregating the assets entrusted to its care, being assets of Thema International Fund plc, representing amounts subscribed for participating shares in its capital by the plaintiffs and other parties.

14 4. An account of the manner in which at all times since the date of first subscription for participating shares in Thema International Fund plc by the plaintiffs, the defendant, by itself, its agent, its sub-custodian or any other party, had and maintained custody of the assets which supposedly had been, and which it confirmed from time to time a been,acquired or dealt in by Thema International Fund plc, such account of the manner of custody to include (without limitation)

15 (a) the nature of the legal title to assets acquired;

16 (b) the procedures for authorising and making payment out of the funds of Thema International Fund plc for the purchase of assets;

17 (c) the procedures for confirmation of due delivery or registration of ownership of such acquired assets against such payment;

18 (d) details of all procedures undertaken by the defendant at any time since the acquisition of such assets to confirm, verify and/or audit the existence, ownership and valuation of those assets, including details of the dates and results of such procedures;

19 (e) details of all auditing, review, verification or other inquiries conducted by the defendant into' the competence, probity and discharge of its duties by each sub-custodian or other agent;

20 (f) full contractual details of arrangements with all sub-custodians or other agents; and

21 (g) the procedures of the defendant for verification of transactions in assets by it or on its behalf by its sub-custodian or other agents.

22 5. Such further proper accounts, inquiries or other directions or orders as may be necessary or appropriate."

23 4 2.3 The motion referred to in para. 2.1 came on for hearing before me. Counsel for Aforge set out the basis on which it was asserted that Aforge was entitled to anaccount at this stage. While there initially appeared to be some difference between counsel as to the proper interpretation of the rules relevant to an application such as this, it became clear in the course of the hearing that there was, at least in general terms, broad agreement as to the proper manner in which such an application comes before the court. I will refer to those issues shortly.

24 5 2.4 However, in the course of his reply, counsel for HTIE suggested that the proper way for the court to deal with these matters was to adjourn...