The Irish arm of banking giant HSBC has told the Commercial Court it is waiting to see if competing claims will be brought over sums of more than €1.2 billion given to it by two Irish-listed investment companies and passed on for investment purposes to alleged US $50 billion fraudster Bernard Madoff and his companies.
Michael Cush SC, for HSBC, said today its legal advice from US lawyers was they believed the US bankruptcy trustee could have no claim over the monies in question but the matter had to be clarified.
Jim Breslin, for the two investment companies - Thema International Fund plc and AA (Alternative Advantage) plc, both of Fitzwilton House, Wilton Place, Dublin - said his clients were in a “very serious” situation and needed to have their action against HSBC aimed at having the monies returned heard urgently.
His side had received correspondence from solicitors acting for investors and anticipated legal actions against it seeking redemption of monies invested were “imminent” but its funds remained frozen by the HSBC companies.
His side needed money to pay US lawyers and to pay registration fees necessary for it to continue marketing its shares in Germany and Italy, counsel added. Those registration payments were overdue.
Mr Cush, for the two defendant HSBC companies - HSBC Securities Services (Ireland) Ltd and HSBC Institutional Trust Services (Ireland) Ltd, Grand Canal Square, Dublin - said his clients would not object at this stage to orders sought by the plaintiffs not to dissipate or transfer the funds but they needed clarification from the US bankruptcy trustee dealing with the Madoff case as to whether he intended to bring any proceedings.
Mr Cush said his clients were making no claim themselves over the monies, but their fear was they were holding monies which might be the subject of competing claims by the plaintiffs and by the US authorities, in circumstances where freezing orders had been made over the assets of Bernard Madoff and his companies.
His side was waiting to see if the US bankruptcy trustee was making a claim and it was taking advice in that regard from US lawyers, counsel added. If the bankruptcy trustee anticipated there would be no claim over the monies, the entire case could be dealt with.
The HSBC companies did not object to orders, the terms of which were handed into court later today, restraining them from dissipating any monies standing to the credit of the plaintiff companies in certain accounts, including accounts referred to as custody accounts and transit accounts, operated by the HSBC companies.
Mr Justice Peter Kelly said he accepted the matters involved were urgent and said he would hear at 24 hours notice to HSBC any application by the plaintiffs for an order requiring payment of a $50,000 dolar retainer to US lawyers, other fees of some €10,000 to avoid de-registration and insurance costs.
The judge added the US bankruptcy trustee would need a reasonable time to take a view on whether there would be any claim over the monies involved. He believed a prudent trustee would seek court approval for any view he might take in that regard.
He adjourned the proceedings to February 10th to enable the view of the trustee to be ascertained. If there was no claim, he would deal with the entire litigation then, the judge said.
In their main action, the plaintiff companies contend the proceedings are governed by Irish law and the US trustee cannot properly exercise jurisdiction relating to any payments out of the accounts in question. Last week, the judge heard HSBC had told the plaintiffs information with regard to the assets of the funds “may not be reliable” given the alleged Madoff fraud.
Thema operates one sub-fund, the Thema fund, said to have had assets of $1.1 billion on November 28th last, most in Bernard Madoff Investment Securities LLC (BMIS). Its administrator is HSBC Securities,while its trustee and custodian is HSBC Institutional.
AA operates the Landmark Investment Ireland Fund and other sub-funds. Both it and Thema suspended dealings in their funds when the Madoff collapse emerged. AA claims the HSBC defendants must return a total of €107 million relating to the Landmark fund and other sub-funds.
