Summary
Mr Madoff confessed his fraud to the US FBI, and was arrested in December 2008. Mrs Sonja Kohn was interviewed by the Austrian State Prosecutor in April 2009.
The English proceedings were commenced in December 2010. The first claimant, Madoff Security International Ltd (MSIL), was an English company. The first five defendants were the English directors of MSIL. The sixth to eight defendants (Mr Madoff’s brothers and two sons) were also directors, but they were not domiciled in England. The ninth defendant was Mrs Sonja Kohn; she operated through a corporate vehicles, including the eleventh and thirteen defendant. MSIL claimed that, in making the payments to the Kohn defendants, each of the directors was in breach of contractual and fiduciary duties. The MSIL’s case against the Kohn defendants was one of knowing receipt and constructive trust. The second claimant’s claim on behalf of the American Madoff company (BLMIS} was that the Kohn defendants are liable to make restitution.
The jurisdiction of the English court was challenged. This posed the question: Did Article 6(1) apply in a case where the claimant did not have a claim against the anchor defendant (but then another claimant was suing all the relevant defendants)?
Although the English court had jurisdiction over some of the claims against the former Directors of MSIL (which were subsequently dismissed on the merits in 2013), Mr Justice Flaux held that it did not have jurisdiction over the BLMIS’s claim, stating:
"81 […] because I have concluded that art.6(1) does not apply where the relevant claimant (here the second claimant as trustee in liquidation of BLMIS and Mr Madoff) is not making any claim against the anchor defendants (here the English directors of MSIL) it necessarily follows that the court has no jurisdiction over the BLMIS claim. In those circumstances, it is not necessary to go further and consider whether there would indeed be a sufficient risk of irreconcilable judgments that it would be expedient to hear the claims together. All I need say for the present is that, whilst Mr Saini focused on potentially irreconcilable judgments of the English court and the Austrian court, I am far from convinced that that is a realistic comparison.
[…]
88 In my judgment, […] the fact that the anchor defendant is domiciled in England and that the claim against him at least gives rise to a serious issue to be tried, so that it is not entirely spurious, are jurisdictional facts which require to be established before art.6(1) can be invoked against the non-domiciled defendant. However, it is not necessary to go beyond showing a serious issue to be tried against the anchor defendant in order to invoke jurisdiction against the non-domiciled defendant. Once there is a serious issue to be tried against the anchor defendant, the claim against that defendant will proceed and, if the other requirements of art.6(1) are satisfied, such as that a risk of irreconcilable judgments is shown, art.6(1) can be invoked.
[…]
124 Thus, in circumstances where, on the facts, the claimants can show an arguable case that Mr Madoff was using the payments to the Kohn defendants to launder the proceeds of his fraud and thus acting dishonestly, the claimants can show at least a serious issue to be tried, that the fact that the payments were all approved and indeed required by Mr Madoff does not excuse the directors of MSIL from breach of fiduciary duty in permitting and making the payments. […].
[…]
129 […] the claimants have shown a serious issue to be tried between MSIL and the first to fifth defendant directors and, hence, between MSIL and the Kohn defendants […].” [81, 88, 124 and 129.]