Over its 50 year history Harneys has been consistently ranked as the top law firm in the Virgin Islands.

“This is a test case involving scores of investors, many of them among the who’s who of global financial institutions,” said Phillip Kite, global head of litigation at Harneys, a BVI-based international law firm which acts for a number of clients in the Fairfield litigation.

“The outcome of the Fairfield litigation could have a profound effect on liquidators of funds in all common law jurisdictions,” Kite said.

Fairfield was one of the main feeder funds which invested in Bernard L. Madoff Investment Securities Limited ("BLMIS") and therefore one of the largest victims of that colossal fraud. The company filed hundreds of claw back claims against investors who had redeemed shares before the Madoff fraud was uncovered, both in the BVI and New York. The total value of these claims is in the region of US$7.5 billion.

Fairfield alleges that before Madoff’s arrest, investors redeemed based on a Net Asset Value (NAV) which itself was calculated on a now-mistaken value of BLMIS, meaning that all redemption payments should be returned.

The three-member Court of Appeal is due to hear three appeals, two of which are brought by Fairfield and the third by the defendants. At the core of the litigation is the question of whether or not the investors who have redeemed their shares before a company is put into liquidation must pay those monies back to the liquidator.

Kite examined the key elements of each appeal: ”The first appeal relates to the finding by the BVI Commercial Court, that it was not open to Fairfield to now seek to recover the price it had paid for the purchase of the shares of the redeeming shareholders simply because Fairfield’s calculation of the NAV was based on information which subsequently proved to be unreliable for reasons unconnected with any of the redeemers.”

The second appeal relates to a further judgment which was in the defendants' favour. “The Commercial Court's finding on the issue of consideration disposed of the last paragraph of the Statement of Claim which Fairfield argued was an alternative claim in mutual mistake. Although there was doubt as to whether such a claim was properly pleaded, the Court found that even a properly drafted mutual mistake claim was not sustainable on those facts. The Court found that even if there had been a mistake that the investor and Fairfield shared as to the underlying investment in BLMIS, Fairfield could still perform its obligations to the investors on a redemption.” Accordingly, the Commercial Court dismissed the actions.

Fairfield is appealing both judgments, and the defendants are appealing a second preliminary issue which they say means that the NAV given at the time of the redemption was final and binding under Fairfield's articles of association.

Kite and partner Kissock Laing are the lead Harneys lawyers involved in the Fairfield litigation. Harneys is collaborating with three other firms which are also representing clients in the Fairfield case.