In a decision of interest in a number of jurisdictions where these types of claims have been made, the BVI Commercial Court handed down judgment today in the claim brought by the liquidators of Fairfield Sentry Limited, a BVI fund which invested in Bernard Madoff’s investment vehicle.

Before Madoff’s arrest investors in Fairfield invested and redeemed in the normal way, based on a NAV which itself was calculated on a presumed value of Fairfield's investments managed by Madoff's company. After Madoff was arrested Fairfield went into liquidation and brought claims against redeemers arguing that a mistake had been made as to the NAV.

In a decision on certain preliminary issues, the Court decided that it was not open to Fairfield to now seek to recover the price it had paid for the purchase of the shares of 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 decision was grounded on the finding that the redeemers had given Fairfield good consideration in redeeming the shares and this was an absolute bar on the claim. (Referring to Aiken v Short [1856] 1H&N 210 and Barclays Bank v WJ Simms Son [1980] QB 677.)

The Court found in favour of Fairfield on a second preliminary issue on an interpretation of what documents constituted certificates as to the NAV in the articles of association.

Read the court judgment.