Clarke J issued a judgment of the Commercial Court dated 10 January 2011, which is interesting as it is the first judgment to issue on a substantive point in what has become known as the "Madoff litigation". The decision is valuable in giving guidance as to the obligation on a depository pursuant to the UCITS Directives and the UCITS Regulations to account directly to investors in a UCITS in respect of its accounting and reporting obligations. However Clarke J concluded that it was not necessary (at this stage) to determine whether, or to what extent, a fiduciary relationship might exist between the depository/trustee and the respective investors.

In considering the depository's reporting obligations under the UCITS Directives and the UCITS Regulations Clarke J looked, in particular at

"the way in which that obligation can be said to apply as and between an investor in a fund and the depository/trustee. The obligation specified in Article 39(d) is an obligation to report to the "investors". The whole point of the report is that the trustee is required to report on the fund. It is true that the report contemplated by Regulation 39(d) is one which is expected to be incorporated by the fund into its annual report. However, that does not, in my view, take away from the fact that the report remains one which is, in the express terms of the Regulation, to be a report "to the investors". On a proper construction of Regulation 39(d) I am satisfied that the statutory reporting obligation is one from the depository/trustee to the investor."

Accordingly, Clarke J concluded that where the investor did not receive the report through the usual channels, then any investor would be entitled to obtain that report directly from the depository/trustee.

The judgment is also of particular interest because of the remarks of Clarke J in the context of the investors' argument that a fiduciary relationship exists between the depository/trustee and the investors. Clarke J noted, in the course of his judgment, that the UCITS regime was designed to harmonise the provisions (regarding UCITS investment funds) across the EU and he went on to say that

"the requirement for legal certainty in implementing measures means that a court in a member state should be slow to bring in, by the back door as it were, a whole series of imprecise rights and obligations, into a measure designed to harmonise the position across the European Union. This should particularly be so where the relevant instruments have expressly dealt with the topic in question, in this case the duty to report. However, where the Directive and/or the implementing measure expressly addresses the parameters of a particular obligation, it seems to me that, irrespective of whether the relationship is to be regarded as one of trustee and beneficiary or not, a court should not ordinarily impose additional imprecise obligations under the same heading through the medium of a trustee/beneficiary relationship, which goes beyond the relevant obligations expressly set out in the statutory framework".