INVESTMENT FUNDS & TRUST DISPUTES
CD: How would you characterise the current landscape for fund-related disputes? What do you consider to be the key underlying reasons behind the rise in investment fund disputes seen in recent years?
Andrew: There are a lot of fund disputes about – perhaps more than ever before. We believe that the 2008 financial crisis is still a significant driver. There is an inevitable time lag between economic events and the litigation that follows. The continuing development of the litigation capacity of the offshore jurisdictions and in particular the Cayman Islands and the British Virgin Islands has expanded the field. The law has also developed, in particular in areas such as the treatment of unpaid but redeemed shareholders, the suspension of redemptions and the duties of directors of offshore funds. The Privy Council continues to play a significant role in these developments, as seen in Fairfield Sentry v Migani. Litigation funding is also increasingly relevant. The number of funders is growing fast and the awareness of the availability of litigation funding is rising among key sectors, such as insolvency practitioners.
Le Tissier: The predominant characteristic of fund-related disputes at present, and for some time, is relatively uncomplicated in nature: they tend to be a product of a failing or failed investment fund. It is not particularly surprising that when investors are in a position where they are unable to redeem all or part of their investment in the manner they intended, or where they have lost or look likely to lose some or all of their investment they will frequently look to see if they are any forms of recourse. That is not to say that disputes do not happen to well performing funds, particular where fee issues may arise, but they tend to be much less normal. While the major motivating factor behind the dispute may well arise because of performance issues, it is inevitable that the precise basis of the claim will be complex in nature and will frequently involve multiple parties and jurisdictions.
Oct-Dec 2016 issue
Ashton Barnes Tee
SCA ONTIER LLP