The judgment of the Privy Council in UBS AG v Fairfield Sentry Ltd (in liquidation)  UKPC 20 concerned proceedings brought in the US Bankruptcy Court in New York by the liquidators of three BVI-based ‘feeder funds’ that placed investments with Bernard Madoff’s investment company. The liquidators seek in those proceedings to recover payments made to those who redeemed their investments prior to the unmasking of Mr Madoff’s fraud in December 2008 and who were, as a result, paid by reference to valuations of their investments that were based on fictitious assets and the fictitious profits that Mr Madoff claimed to have generated. The liquidators rely on (amongst other things) the statutory avoidance provisions in ss.245 – 249 of the BVI Insolvency Act 2003 on the grounds that the payments constituted unlawful preferences or transactions at an undervalue.
A group of defendants to the New York proceedings brought a claim before the BVI courts seeking to restrain the liquidators’ pursuit of the New York proceedings against them on a number of grounds. The claim was dismissed by the BVI High Court and ECCA. On appeal to the Privy Council, the sole argument pursued was that the power to set aside transactions under s.249 of the Insolvency Act 2003 is expressed in the statute to be conferred on the BVI High Court alone and so cannot be exercised by a foreign court. This was said to render the New York proceedings oppressive, vexatious or contrary to BVI public policy and therefore to justify the grant of an antisuit injunction. Alternatively, the claim sought a declaration that the power to set aside transactions in s.249 cannot be exercised by a foreign court (with the aim of using the declaration to persuade the US Bankruptcy Court to dismiss the proceedings).
The Privy Council rejected the claim. In a judgment delivered by Lord Hodge, the Board held that the reference to the BVI High Court in the statute merely indicates the court before which an application for relief is to be brought if brought in the BVI and does not preclude any foreign court from applying or granting relief in accordance with the Insolvency Act 2003 if it chooses to do so.
In its judgment, the Privy Council paid tribute to the “intellect and humanity and…unrivalled contribution to corporate insolvency law” of Gabriel Moss QC, who appeared for the liquidators on the appeal and who is much missed by those who worked with him.
The judgment is here.
Stephen Midwinter QC appeared for the liquidators, instructed by Forbes Hare LLP.