Thema International Fund Plc v HSBC Institutional Trust Services (Irl) Ltd and Others

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Clarke
• Judgment Date: 20 September 2011
• Neutral Citation: [2011] IEHC 357
• Date: 20 September 2011

[2011] IEHC 357

THE HIGH COURT

[No. 10983 P/2008]

Thema International Fund PLC v HSBC Institutional Trust Services (Irl) Ltd & Ors

COMMERCIAL

BETWEEN

THEMA INTERNATIONAL FUND PLC

PLAINTIFF

AND

HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LIMITED

DEFENDANT

AND

THEMA ASSEST MANAGEMENT LIMITED AND 2020 MEDICI AG

THIRD PARTIES

KALIX FUND LTD v HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LTD & UNIONE DI BANCHE ITALIANE SOCIETA COOPERATIVA PER AZIONI (T/A UBI BANCA) v THEMA INTERNATIONAL FUND PLC & HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LTD 2009 2 IR 581

THEMA INTERNATIONAL FUND PLC & A.A (ALTERNATIVE ADVANTAGE) PLC v HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) & ORS UNREP HIGH 26.1.2010 2010/49/12395 2010 IEHC 19

AFORGE FINANCE S.A.S. & AFORGE GESTION S.A.S. v HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LTD 2010 2 IR 688

AFORGE FINANCE SAS & ORS v HSBC INSTITUTIONAL TRUST SERVICES (IRL) LTD UNREP HIGH 10.1.2011 2011 IEHC 6

HALSBURYS LAWS OF ENGLAND 1ED 1907 VOL 1 P51

O'KEEFFE v SCALES 1998 1 IR 290

CULLEN & ORS v WICKLOW COUNTY MANAGER UNREP SUPREME 30.7.2010 2010/9/2114 2010 IESC 49

MOORVIEW DEVELOPMENTS LTD & ORS v FIRST ACTIVE PLC UNREP HIGH 16.3.2011 2011 IEHC 117

HILL v ARCHBOLD 1968 1 QB 686

ABRAHAM v THOMPSON 1997 4 AER 362

SAUNDERS v HAUGHTON 2009 NZCA 610

CHARTSPIKE PPY LTD v CHAHOUD 2001 NSWSC 585

MERCHANTBRIDGE & COMPANY LTD & ANOR v SAFFRON GENERAL PARTNER 1 LTD & ORS 2011 EWHC 1524 (COMM)

CRIMINAL LAW ACT 1967 S13(1)(A)

CRIMINAL LAW ACT 1967 S14(1)

RAIFFEISEN ZENTRAL BANK OSTEREICH AG v CROSSEAS SHIPPING LTD & ORS 2003 EWHC 1381 (COMM)

PRACTICE AND PROCEDURE

Delay

Third party funding - Maintenance - Champerty - Costs - Whether third party funding of litigation lawful - Whether costs can be awarded against third party funder instead of impecunious party - Whether disclosure of details of third party funding can be ordered prior to judgment - O'Keeffe v Scales [1998] 1 IR 290 applied; Moorview Developments Ltd v First Active plc [2011] IEHC 117, (Unrep, Clarke J, 16/3/2011) followed; Cullen v Wicklow County Manager [2010] IESC 49, [2011] 1 IR 152 considered - Abraham v Thompson [1997] 4 All ER 362, Chartspike Pty Ltd v Chahoud [2001] NSWSC 585, (Unrep, SC of NSWales, 3/7/2001), Hill v. Archbold [1968] 1 QB 686, Merchantbridge & Co Ltd v Safron General Partner 1 Ltd. [2011] EWHC 1524 (Comm), (Unrep, HC of England and Wales, Judge Mackie QC, 15/6/2011), Raiffeisen Zentral Bank Ostereich Ag v Crosseas Shipping Ltd [2003] EWHC 1381 (Comm), (Unrep, HC of England and Wales, Morison J, 13/6/2003) and Saunders v Haughton [2009] NZCA 610, [2010] 3 NZLR 331 distinguished - Disclosure refused on conditions (2008/10983P - Clarke J - 20/9/2011) [2011] IEHC 357

Thema International Fund Ltd v HSBS Institutional Trust Services (Ireland) Ltd

Facts: The judgment arose out of an application brought by the defendant HTIE to seek disclosure of how the plaintiff was being funded as part of the Madoff litigation. HTIE asserted that there was sufficient evidence before the Court to support the inference that Thema was not funding the litigation itself but rather from a third party, that the Courts had jurisdiction to make orders against such parties and that HTIE was now entitled to disclosure as to the funding.

Held by Clarke J. that the Court would make no order provided that a senior official within Thema was willing to give personal undertakings- that any person providing funding for the litigation would be informed in general terms of the jurisprudence of the Court, that there was jurisdiction to make third party funder costs orders and that proper records be maintained to identify the amount and source of any third party funding. It was a reasonable conclusion to draw from the evidence that Thema was in receipt of some form of third party funding.

Reporter: E.F.

1 JUDGMENT of Mr. Justice Clarke on the 20th September, 2011

1. Introduction

2 2 1.1 This judgment arises out of an application brought by the defendant ("HTIE") seeking disclosure orders in relation to how the plaintiff ("Thema") is being funded in respect of this litigation. These proceedings are part of the Madoff litigation which has been under case management for some time and has been the subject of some judgments already namely: Kalix Fund Ltd & Anor v HSBC Institutional Trust Services (Ireland) [2009] IEHC 457; Thema International Fund PLC & Anor v HSBC Institutional TrustServices (Ireland) [2010] IEHC 19; and Aforge Finance S.A.S. & Ors v HSBC Institutional Trust Services (Ireland) Ltd [2009] IEHC 565 & [2011] IEHC 6;.

3 3 1.2 The order sought by HTIE is of a type which has, so far as I am aware, never previously been sought or indeed made in this jurisdiction. There is, therefore, a very real question as to whether the court has the power to make such orders and, even if there is such a power,, a further question then arises as to the criteria which the court should apply in considering whether to order funding disclosure of the type sought.

4 4 1.3 In support of its application HTIE maintains a number of propositions to which I now turn.

2. HTIE's Case

5 2 2.1 HTIE asserts the following:-

6 a A. That there is sufficient evidence placed before the court to support the inference that Thema is not funding this litigation itself but rather is obtaining funding from a third party;

7 b B. That the Courts in Ireland have a jurisdiction, in a case where a third party is shown to have funded litigation on behalf of an impecunious party, to make an order against that third party for the payment of any costs which might, in the ordinary way, have been awarded against the impecunious party concerned; and

8 c C. That HTIE is now entitled to disclosure as to Thema's funding in the form sought in this application for a variety of reasons, which are addressed in detail later in this judgment.

9 3 2.2 I propose dealing with each of those propositions and Thema's answer to them in turn.

3. Is Thema being funded by a Third Party?

10 2 3.1 HTIE has placed before the court evidence of a number of communications emanating from Thema. The first is a shareholder circular of the 9 ^th July, 2010, which arose in the context of a possible settlement of a claim under the United States Securities Investment Protection Act. That circular certainly seems to suggest that, in the absence of an acceptance by Thema of the settlement proposal then under consideration, Thema would lack adequate funding to, amongst other things, pursue the litigation against HTIE in the absence of significant shareholder advances.

11 3 3.2 A further shareholder notification of the 18 ^th August, 2010, was put in evidence. That notification post-dated what was described as an unexpected withdrawal of the settlement proposal with the US Trustee. The notification informs shareholders that Thema "now no longer has any source of funding with which it could continue to operate and thereby pursue the proceedings".

12 4 3.3 What is described as a draft shareholder notice of the 19 ^th November, 2010, appears to suggest that "liquidation is no longer in contemplation and that the proceedings being taken by Thema in the Irish High Court are being pursued vigorously".

13 5 3.4 Correspondence ensued between the parties in which solicitors for HTIE asked the solicitors for Thema as to whether Thema had obtained financial assistance from a third party and, if so, the identity of such party and details of the terms on which such assistance was or was being provided. In a reply of the 4 ^th March, 2011, Thema confined itself to stating that "no third party is maintaining these proceedings".

14 6 3.5 HTIE placed the above documentation before the court in affidavit evidence. Thema's response was simply to deny that HTIE had any entitlement to information regarding terms or arrangements which allowed Thema to continue its litigation save for an acceptance that HTIE would be entitled to know whether Thema was in receipt of funding from "unrelated third parties, or whether there is another unidentified adversary against whom it is actually fighting". A denial that any funding from unrelated third parties was available to Thema is included in the relevant affidavit. In that context HTIE did not suggest at the hearing before me that Thema was in receipt of funding which would amount to either maintenance or champerty.

15 7 3.6 It seems to me that the only reasonable conclusion to draw from the evidence is that Thema is in receipt of some form of third party funding. The various communications with its shareholders bear the inference that Thema did not have sufficient funds itself to maintain these proceedings. In the absence of any explanation being given as to how things have changed from the time when those shareholder communications took place, and in the absence of any denial in Mr. Brady's affidavit of there being any external funding, it seems to me that I should conclude on the facts that there is a third party funder or funders assisting Thema in this litigation. Whether that funder or those funders are paying in full for the litigation or whether it has been possible, for example, to make arrangements with Thema's advisers, which do not require immediate full funding, does not alter that conclusion. However, I am also satisfied on the evidence that any funder has a sufficient connection with Thema so as to take that funding outside the scope of maintenance and/or champerty.

16 8 3.7 As maintenance and champerty have some relevance to the third issue identified earlier, I should say something briefly about that area of the law at this stage. In Hallsbury's Laws of England (1 ^st Ed.) Vol. 1, p. 51, maintenance is defined as the giving of assistance or encouragement to one of...