Weavering Macro Fixed Income Fund Ltd v PNC Global Investment Servicing (Europe) Ltd (orse BNY Mellon Investment Servicing (International) Ltd)

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 04 December 2012
• Neutral Citation: [2012] IESC 60
• Court: Supreme Court
• Docket Number: [S.C. No. 86 of 2012]
• Date: 04 December 2012

Weavering Macro Fixed Income Fund Ltd v PNC Global Investment Servicing (Europe) Ltd (orse BNY Mellon Investment Servicing (International) Ltd)

Between/

Weavering Macro Fixed Income Fund Limited (in liquidation)

Plaintiff/Appellant

and

PNC Global Investment Servicing (Europe) Limited (now known as BNY Mellon Investment Servicing (International) Limited)

Respondent/Defendant

[2012] IESC 60

McKechnie J.

Clarke J.

MacMenamin J.

[Appeal No: 86/2012]

THE SUPREME COURT

PRACTICE AND PROCEDURE

Case management

Modular trials - Jurisdiction of appellate court to interfere with case management orders - Principles to be applied regarding modular trials - Whether trial judge erred in directing modular trial - Atlantic Shellfish Limited v Cork County Council [2010] IEHC 294, (Unrep, Laffoy J, 20/5/2010); Cork Plastics (Manufacturing) v Ineos Compound UK Limited [2008] IEHC 93, (Unrep, Clarke J, 7/3/2008); Dowling v Minister for Finance [2012] IESC 32, (Unrep, SC, 24/5/2012); Kilty v Hayden [1969] IR 261; McCabe v Ireland [1999] 4 IR 151; McCann v Desmond [2010] IEHC 164, [2010] 4 IR 554; McDonald v Bord na gCon [1964] IR 350; Millar v Peeples [1995] NI 6; PJ Carroll & Co Ltd v Minister for Health and Children [2005] IESC 26, [2005] 1 IR 294; PJ Carroll & Co Ltd v Minister for Health (No 2) [2005] IEHC 267, [2005] 3 IR 457; RN v Refugee Appeals Tribunal [2007] IESC 25, [2008] 1 ILRM 289 and Ryan v Minister for Justice (Unrep, SC, 21/12/2000) considered - Rules of the Superior Courts 1986 (SI 15/1986), O 25, 34 and 35 - Relief allowed including inter alia setting aside of direction for modular trial (86/2012 - SC - 4/12/2012) [2012] IESC 60

Weavering Macro Fixed Income v PNC global Investment

Facts: The parties had entered into an agreement in respect of administrative services provided by the respondent to the appellant. The appellant operated as an investment vehicle, and in the aftermath of the banking crisis, had gone into liquidation following an inability to repay funds invested. The appellant contended the respondent was responsible for the miscalculation of assets available, and sought damages on a number of grounds. At first instance, the High Court had ordered a modular trial to ensure a structure to the trial of the complex issues at hand. The appellant sought to appeal this case management direction.

Held by Clark J, the other Justices concurring, that there were few circumstances in which the Supreme Court would deem it fit to modify case management directions set by the High Court at first instance. Case law did show however that there were occasions where the exercise of the power to overturn case management directions was justified. PJ Carroll & Co v Minister for Health and Children [2005] 1 IR 294 considered and Dowling v Minister for Finance [2012] IESC 32; [2012] 5 JIC 2403 considered.

Clarke J reviewed the case law on modular trials and proceeded to analyse whether the facts at hand were sufficient to justify the use of a modular trial method. Clark J stated that the courts should exercise particular care where issues on liability are split out as they may prove difficult to determine in isolation. Clark J considered that the method in which the first of the outstanding issues was to be tried was insufficiently precise, and likely not to assist a true determination of the matter as a whole. Cork Plastics Manufacturing v Ineos Compound UK Ltd [2008] IEHC 93; [2008] 3 JIC 0701, McCann v Desmond [2010] 4 IR 554 and Atlantic Shellfish v Cork County Council [2010] IEHC 294 considered

Whilst Clark J did not believe that a modular trial was unsuitable in any circumstances for the determination of the issues at hand, it was clear that the form specified by the High Court was not suitable and the appeal would therefore be allowed. The matter would therefore be referred back to the High Court.

DOWLING & ORS v MIN FOR FINANCE & ORS UNREP SUPREME 24.5.2012 2012 IESC 32

PJ CARROLL & CO LTD & ORS v MIN FOR HEALTH & ORS 2005 1 IR 294

CORK PLASTICS (MANUFACTURING) & ORS v INEOS COMPOUND UK LTD & TIOXIDE EUROPE LTD UNREP CLARKE 7.3.2008 2008/8/1638 2008 IEHC 93

MCCANN v DESMOND 2010 4 IR 554 2010/31/7802 2010 IEHC 164

ATLANTIC SHELLFISH LTD & HUGH-JONES v CORK CO COUNCIL & ORS UNREP LAFFOY 20.5.2010 2010/3/610 2010 IEHC 294

RSC O.25

RSC O.34

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 3ED 2012 PARA 14.03

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 3ED 2012 PARA 14.04

KILTY v HAYDEN & ORS 1969 IR 261

MCCABE v IRELAND & ORS 1999 4 IR 151 2000 1 ILRM 410 1999/17/5177

RYAN v MIN FOR JUSTICE & ORS UNREP SUPREME 21.12.2000 2000/16/6149

RSC O.35

1. Introduction

2 1.1 These proceedings arise out of a commercial arrangement entered into between the parties. The plaintiff/appellant ("Weavering") is a Cayman Islands company which is now in liquidation. Weavering was an investment vehicle into which investors placed monies in return for redeemable shares. The monies were invested with a periodic valuation of the net assets of the company (described as net asset value or "NAV") being carried out so as to permit investors who wished to withdraw their monies to be paid their appropriate share of the invested funds based on the NAV valuation. The respondent/defendant ("PNC") provided a very wide range of administrative services to Weavering such that, in substance, the entire running of Weavering was, it would appear, conducted by PNC.

3 1.2 The parties' relationship was largely governed by an agreement termed an "Administration and Accounting Services Agreement" ("the Administration Agreement") which agreement had initially been entered into between Weavering and a predecessor of PNC being PSPC International Limited. Certain other documents which passed between the parties from time to time are also said to influence the legal rights and obligations of those parties. Nothing turns on the detail of those matters for the purposes of this judgment.

4 1.3 In circumstances which it will be necessary to address in a little more detail, and which are, in truth, still very unclear, it transpired in 2009 that there were no substantial assets available to Weavering notwithstanding the fact that the NAV valuation produced from time to time by PNC seemed to disclose very substantial net assets indeed. It would appear that a principal feature of the investments made was in interest rate swap transactions to which the counter-party was Weavering Capital Fund Limited (BVI) ("WCF"). The court understands that, in the aftermath of the collapse of Lehman Brothers, investors sought to withdraw their funds from Weavering in significant amounts. After a period it became clear that there were insufficient funds to pay such investors the amounts to which they would appear to have been entitled on the basis that the NAV calculations were correct.

5 1.4 As a consequence Weavering went into liquidation on the 3 ^rd April, 2009. As of that date the reported NAV as computed by PNC was US$506,307,034.56. As part of that calculation a value of US$637,121,093.48 was attributed to the interest rate swaps to which reference has already been made. The value of the swaps amounted, in substance, to funds apparently due to Weavering from WCF on foot of a calculation deriving from interest rate movements by reference to the London Interbank Rate (Libor). However, it is suggested that the assets of WCF as of the 31 ^st December, 2008 were under US$77 million so that whatever theoretical liability there may have been from WCF in favour of Weavering, the vast majority of the money owed was, in practical terms, incapable of being recovered and the true value of the swaps was, therefore, significantly overstated.

6 1.5 In these proceedings generally Weavering asserts that PNC is liable to it for damages for breach of contract, breach of duty and misrepresentation and claims damages which appear to exceed €300 million. This judgment is not, however, concerned with the substance of that claim. Rather it is concerned with an appeal brought by Weavering to this court against an order made in the High Court (Charleton J.) directing a modular trial. In order to understand the issues which arise on this appeal it is necessary to turn to the application made by PNC which resulted in the order of Charleton J. now under appeal. It is also necessary to consider the precise terms of the modular trial directed by Charleton J.

2. The Application in the High Court

2 2.1 The application to the High Court for directions as to the mode of trial of this case was heard by Charleton J. on the 12 ^th, 13 ^th and 17 ^th of January 2012. In that application PNC sought to have a number of legal questions decided as "discrete issues", in what, it submitted, was an attempt to secure the completion of the litigation in as expeditious and cost effective a manner as possible. Twelve issues were identified in the grounding notice of motion. However, PNC later withdrew issues numbered 5, 6 and 7. As to the remaining proposed issues it was submitted that if issues 1 and 2, relating to the available causes of action by reference to time limits, were determined in favour of PNC, same would amount to a complete defence to the proceedings. Issues 3, 4 and 8, relating to the effect of related Cayman Islands proceedings on these proceedings, were said to have the potential to significantly restrict the issues which would have to be determined at the main trial. Finally, it was contended that the early resolution of issues 9, 10,11 and 12, relating to the interpretation of certain clauses of the Administration Agreement and, perhaps, their application to the facts, would have the potential to determine the entire proceedings or narrow significantly the issues to be...