Picard (The Foreign Representative of Bernard L. Madoff Investment Securities Llc) v Fim Advisers Llp

Relief requiring delivery of information under Article 21(1)(d) of the Cross-Border Insolvency Regulations 2006 involves both jurisdiction and discretion. The information must concern the debtor’s assets, affairs, rights, obligations or liabilities. Once that threshold is met, the court must consider all relevant circumstances and adequately protect the respondent’s interests. The court may apply principles analogous to those governing office-holder investigations under the Insolvency Act 1986. Orders should enable the office holder to discover the true facts quickly and economically, but must not be unnecessary, unreasonable or oppressive. In a substantial fraud, the court may require a wide historical search where the evidence shows that earlier documents may be relevant. Disclosure from potentially duplicative backup systems may instead be staged.

Irving H Picard, the foreign representative and trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, applied for relief requiring FIM Advisers LLP to produce documents concerning BLMIS’s assets, affairs, rights, obligations and liabilities. The application arose from the collapse of BLMIS’s fraudulent investment business and the Trustee’s statutory investigations in the United States liquidation.

FIM Advisers accepted that much of the material sought fell within Article 21(1)(d), but disputed the search period, the locations to be searched and two categories of documents. The central issues were the proper scope of the information order and whether the proposed searches were necessary, proportionate and adequately protective of FIM Advisers’ interests.

1. Jurisdiction and discretion. Article 21(1)(d) of the Cross-Border Insolvency Regulations 2006 has a jurisdictional and a discretionary component. The court must first determine whether the information concerns the debtor’s assets, affairs, rights, obligations or liabilities. If so, it may order delivery of the information, having regard to all relevant circumstances and to the adequate protection required by Article 22.
2. The court treated principles applicable under sections 236 and 366 of the Insolvency Act 1986 as relevant. The purpose is to enable the office holder to discover the true facts so that duties can be completed quickly, effectively and economically. Cooperation may be required even from an honest person involved in a major fraud. The order must nevertheless avoid unnecessary, unreasonable or oppressive requirements, and the likely disruption, stress and expense to the respondent are relevant factors. Considerable weight should be given to the office holder’s views.
3. The proposed search period was not properly limited to the period after FIM Advisers took over FIM Limited’s business. The evidence indicated a longstanding relationship between the relevant entities and BLMIS, making earlier documents potentially relevant. FIM Advisers was therefore required to search documents generated from 1 January 1993 to 31 January 2009.
4. The court declined, at that stage, to order disclosure from online backup systems and off-site backup tapes because of likely duplication with the principal searches. It directed that the materials be restored so that a further application could be made promptly if the initial disclosure proved fruitful. Disclosure could proceed on a rolling basis after review.
5. The court ordered disclosure of post-11 December 2008 complaints, regulatory inquiries and litigation-related documents because they might reveal information about BLMIS’s business, assets, obligations and liabilities. It also ordered disclosure concerning the organisation and ownership of FIM Advisers, the Kingate Funds and Kingate Management, since that material could illuminate the affairs of BLMIS, the parties’ involvement and potential claims concerning assets or transfers. The precise order was to be settled after further submissions.