Case No:  POCA 9 of 2009
IN THE CENTRAL CRIMINAL COURT
SITTING AT THE ROLLS BUILDING

Rolls Building
7 Rolls Building, London EC4A 1NL

Date:  16th January 2012

Before :

MRS JUSTICE GLOSTER, DBE
- - - - - - - - - - - - - - - - - - - - -
Between :

In The Matter of The Proceeds of Crime Act 2002
(External Requests and Orders) Order 2005	

(1)
(2)
(3)	And In The Matter Of
Robert Allen Stanford
James Davis
Laura Pendergest Holt	

Defendants	
	Between		
	Stanford International Bank Limited
(acting by its Joint Liquidators)	
Applicant	
	- and -		
	The Director of the Serious Fraud Office	Respondent	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Andrew Bodnar Esq 
(instructed by Lawrence Graham LLP) for the Applicant
Andrew Mitchell Esq, QC and Christopher Convey 
(instructed by the Director) for the Serious Fraud Office

Hearing dates:  3rd and 4th August 2011
- - - - - - - - - - - - - - - - - - - - -
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

.............................

MRS JUSTICE GLOSTER, DBE

Mrs Justice Gloster:

Introduction
1.	These are the reasons for the order which I made on 4 August 2011 (“the 4 August Order”) on the application of Marcus Wide (“Mr. Wide”), a partner in Grant Thornton, British Virgin Islands, and Hugh Dickson, a partner in Grant Thornton, Cayman Islands, the joint liquidators (“the Joint Liquidators”) of Stanford International Bank Limited (“SIB”), varying a restraint order made by the Court of Appeal on 25 February 2010 (effective from 29 July 2009) (“the New Restraint Order”), so as to permit the Joint Liquidators to convert into cash as necessary, and to draw down, sums not exceeding US$ (“$”) 20 million from SIB’s assets within the jurisdiction of the English Court, and subject to the Restraint Order (“the Restrained Assets”), in order to fund the ongoing liquidation of SIB.
2.	The 4 August Order was subject to certain obligations imposed on the Joint Liquidators, the most important of which were:
i)	an obligation on the Joint Liquidators to repay the funds drawn down pursuant to the order, together with interest, on a dividend basis of 10% of the net proceeds realised from any recoveries to SIB’s estate, as and when such funds were received;
ii)	certain monthly notification requirements to inform the Serious Fraud Office (“SFO”), inter alia, of the purpose of the drawdowns, their gross recoveries, a summary of their costs and disbursements, and of their fees in effecting recoveries;
iii)	an undertaking by the Joint Liquidators to use and apply the funds drawn down for specific purposes.
3.	On 17 October 2011, I varied the 4 August Order in certain respects to clarify various points that had been raised by third party holders of the Restrained Assets, and, in particular, expressly to provide that the Joint Liquidators could draw down funds in pounds sterling.
4.	I attach at Schedule 1 to this judgment the 4 August Order as subsequently varied by my order of 17 October 2011.
Factual Background
5.	A full account of the relevant factual background prior to 25 February 2010 is set out in the Court of Appeal’s judgment in In re Stanford International Bank Limited, Janvey v Wastell and Another, The Serious Fraud Office v Wastell and Another [2010] EWCA Civ 137, [2011] Ch 33.
6.	For present purposes, the following summary is sufficient.  Until it was placed under the protection of:  a) the United States’ courts on 17 February 2009;  and b) the Financial Service Regulatory Commission of Antigua and Barbuda (“the FSRC”), SIB purported to operate as an international bank, principally from Antigua, although it could not operate as a domestic banking business, in that it could not accept deposits from Antiguans.  SIB was incorporated in 1985, in Montserrat, in its original form under the name Guardian International Bank Limited (“Guardian Bank”).  In or about 1990, Guardian Bank changed its domicile to Antigua, and was continued under the International Business Corporations Act, Cap 222 (Antigua and Barbuda) (1985).  On 20 December 1994, Guardian Bank changed its name to SIB.  All of SIB’s share capital was, at all material times, held by Sir Robert Allen Stanford (“RAS”), through a holding company.  Between 1990 and 17 February 2009, SIB’s directors promoted SIB as a safe financial institution holding and profitably investing depositors’ funds.
7.	It is alleged that SIB was, in fact, involved in a fraudulent Ponzi scheme operated by RAS and his associates (including James M Davis (“Mr. Davis”)), under which some 27,000 investors, primarily from North, Central and South America, bought certificates of deposit from SIB in a total amount of $ 104 billion.  The scheme collapsed at the beginning of 2009.
8.	The Joint Liquidators’ investigations to date indicate that significant portions of SIB’s assets appear to have been misapplied in order:  a) to pay purported interest on deposits, or to redeem certificates of deposit;  and b) to fund the high lifestyle of RAS and others involved in the affairs of SIB.  The Joint Liquidators took the view that at least 80% of SIB’s asset portfolio was allegedly misappropriated or misapplied by the directors of SIB, and placed into speculative investments, diverted to other companies owned by RAS, used to fund RAS’s lifestyle by way of $ 1.79 billion worth of concealed and unsecured SIB shareholder loans, and to pay “Ponzi payments” (i.e. redemption and interest payments) to depositors of SIB.
9.	The Joint Liquidators have not found, nor did the previous liquidators report finding, any evidence of genuine underlying profitable economic activity to support SIB’s audited accounts.  The available evidence indicates that the value, “as is”, of the known assets of SIB which have either been recovered, or are restrained for the benefit of SIB’s creditors may be in the region of $ 413 million, out of a reported $ 8.3 billion in assets as represented by SIB’s directors prior to the inception of the SEC receivership proceedings.  The Joint Liquidators’ evidence shows that 99.7% of the total number of SIB’s creditors are depositors, and recognised as “victims” of the fraud by US law enforcement agencies.
Procedural Background
10.	The procedural background can be summarised as follows:
i)	On 16 February 2009, the United States Securities and Exchange Commission (“the SEC”) launched a civil fraud action in the United States District Court (Northern District of Texas) against RAS, SIB and others.  On the same day, the SEC sought and obtained the appointment of an equitable receiver, Ralph Janvey (“the SEC Receiver”), as receiver of the assets (wherever situate) of RAS, certain of his associates, SIB and all other entities in the Stanford Group (“the SEC Receivership”).
ii)	On 19 February 2009, the FSRC appointed Peter Wastell and Nigel Hamilton-Smith as the receiver-managers of SIB (“the Antiguan Receiver-Managers”).  This appointment was ratified by the High Court of Antigua and Barbuda (“the Antiguan Court”) on 26 February 2009.
iii)	On 25 March 2009, the FSRC presented a petition to the Antiguan Court seeking the winding up of SIB, following a recommendation by the Antiguan Receiver-Managers that SIB was insolvent and should be put into liquidation.
iv)	On 27 March 2009, the SEC obtained a without notice freezing order in the Queen’s Bench Division of the English High Court, restraining SIB, together with RAS and other Stanford entities, from dealing with their assets in England and Wales (“the Freezing Order”).  This order was extended by an order of Stadlen J dated 6 April 2009, an order of Bean J dated 27 April 2009, and a further order of Stadlen J dated 18 May 2009.
v)	On 1 April 2009 the SEC Receiver applied to the Antiguan Court for an order entitling him to intervene in the winding-up petitions presented to that court.  That application was dismissed on 7 April 2009.
vi)	On 6 April 2009, the hearing of the petition to wind up SIB began in the Antiguan Court.
vii)	On 6 April the United States Department of Justice (“DOJ”) (Criminal Division) wrote to the Central Authority of the United Kingdom (“the letter of request”), pursuant to the Treaty between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America on Mutual Legal Assistance in Criminal Matters (Washington, 6 January 1994) (Treaty Series No 14 of 1997) (Cm 3546) requesting the immediate assistance of the United Kingdom in relation to the investigation by the DOJ of alleged violations of US criminal laws involving fraud on investors committed by, amongst others, RAS, Mr. Davis, Laura Pendergest-Holt and SIB.  The letter of request sought the restraint of all assets of those defendants in the UK so that they might be secured for confiscation at a later date.
viii)	On 7 April 2009, on the ex parte application of in-house counsel for the SFO, HHJ Kramer QC, sitting at the Central Criminal Court, made a restraint order (“the Original Restraint Order”) over the assets of, inter alia, SIB in England and Wales pursuant to Article 8 of the Proceeds of Crime Act (External Requests and Orders) Order 2005 (“ERO”).
ix)	On 15 April 2009, the Antiguan Court made an order on the FSRC’s petition that SIB be wound up under the court’s supervision, and appointed the Antiguan Receiver-Managers as joint liquidators (“the former Joint Liquidators”).  Paragraph 5 of the order vested all assets of SIB of whatever nature and wherever situate in the former Joint Liquidators.
x)	On 22 April 2009, the former Joint Liquidators made an application to the Chancery Division of the English High Court under the provisions of the UNCITRAL Model Law on Cross-Border Insolvency (“UNCITRAL”) as given the force of law in the United Kingdom by the Cross Border Insolvency Regulations 2006 (“the Regulations”) for recognition of the Antiguan liquidation of SIB as a “foreign main proceeding”, pursuant to Article 17(2)(a) of UNCITRAL, and for an order entrusting the distribution of SIB’s assets within the UK to them, in their capacity as such liquidators.
xi)	On 27 April 2009, the Original Restraint Order was served on SIB.  However, the evidence in support of that application was not served at that time.
xii)	On 8 May 2009, the SEC Receiver issued his own application in the Chancery Division for recognition of the SEC Receivership (in relation to SIB, RAS and the other entities in the Stanford group) either pursuant to UNCITRAL or at common law.
xiii)	On 19 June 2009, the United States’ District Court (Southern District of Texas) unsealed a United States Grand Jury indictment against RAS and certain of his associates.  SIB itself was not indicted.
xiv)	The recognition applications of the former Joint Liquidators and the SEC Receiver were heard by Lewison J on 10-12 June 2009.  Lewison J was not then told of the Original Restraint Order, nor did he give the SFO the opportunity to be heard on the application (which he should, and would have done, if the provision of Article 17(6) of ERO had been brought to his attention).  Lewison J handed down his reserved judgment on 3 July 2009.  In summary, he acceded to the application of the former Joint Liquidators, but dismissed that of the SEC Receiver.  In addition, he indicated that the former Joint Liquidators should secure the assets of SIB within the jurisdiction, and remit them to Antigua, to be administered in the winding-up there.  There was a subsequent hearing on 9 July to determine the form of order Lewison J should make, at which he was told of the existence of the Original Restraint Order, and modified his order so as to provide for it to take effect subject to that order.
xv)	On 17 July 2009, the former Joint Liquidators applied to HHJ Kramer QC, sitting at the Central Criminal Court, to vary the Original Restraint Order, for the limited purposes identified in the Recognition Order (namely to discharge certain costs of the liquidation and the former Joint Liquidators’ costs of the recognition hearing).  
xvi)	On 24 July 2009, the former Joint Liquidators’ application to vary the Original Restraint Order was heard before HHJ Kramer QC.  Following service by the SFO - for the first time on that date - of the evidence on which it had relied in support of the application for the Original Restraint Order, the Joint Liquidators widened the scope of the application to include an application to discharge the Original Restraint Order.
xvii)	On 24 July 2009, on the application of the former Joint Liquidators, Jack J, sitting in the Queen’s Bench Division discharged the freezing order against SIB, on the grounds that it was no longer necessary, given the existence of the liquidation, the SEC Receivership and the Original Restraint Order.
xviii)	On 29 July 2009, HHJ Kramer QC, sitting in the Central Criminal Court, gave judgment in respect of the former Joint Liquidators’ application to vary or discharge the Original Restraint Order.  HHJ Kramer refused to discharge or vary the order on the grounds of misrepresentation or material non-disclosure, or to vary it so as to enable the former Joint Liquidators to implement the directions of Lewison J.
xix)	Between 16 and 20 November 2009, the Court of Appeal, in a conjoined sitting of the Criminal and Civil Division, heard the former Joint Liquidators’ appeal against the order of HHJ Kramer QC dated 29 July 2009, and the respective appeals of the SEC Receiver and the SFO against the Recognition Order of Lewison J.  The Court of Appeal reserved its judgment.
xx)	On 25 February 2010, the Court of Appeal:  a) discharged the Original Restraint Order but made the New Restraint Order on the same terms with effect from 29 July 2009;  and b) upheld the Recognition Order.
In summary, the Court of Appeal held:
a)	dismissing the appeal from Lewison J, that the Antiguan liquidation was a “foreign proceeding” within the definition in Article 2 of UNCITRAL, but the SEC Receivership was not;  and that similarly, the former Joint Liquidators, but not the SEC Receiver, were foreign representatives of SIB;
b)	that the Antiguan liquidation was a “foreign main proceeding”;
c)	that there had been material misrepresentation and non-disclosure of material matters when the ex parte application had been made to HHJ Kramer QC;
d)	that, in those circumstances, the court was entitled to set aside the restraint order so that the SFO was deprived of any advantage which it had obtained by means of non-disclosure, and to make clear its disapproval of the SFO’s conduct;
e)	that the Antiguan winding-up order had had the effect under English law of vesting SIB’s moveables in the liquidators, and that the former Joint Liquidators therefore had an interest in SIB’s bank deposits, as referred to in the letter of request;
f)	that since the former Joint Liquidators were not “persons other than the defendant”, Article 46(3) of ERO did not apply, and the discretion in Article 8(1) had to be exercised, in accordance with Article 46(2)(b), with a view to securing that there was no diminution in the value of the property identified in the request;
g)	that (Arden LJ dissenting), in the circumstances, that consideration required that the Original Restraint Order be re-granted with effect from the date on which the judge had refused to discharge or vary the original order;  and
h)	that, accordingly, administrative priority was to be conferred on the SFO and the DOJ.
xxi)	On 24 March 2010, SIB, acting by the former Joint Liquidators, applied to the United Kingdom Supreme Court (the “UKSC”) for permission to appeal the judgment of the Court of Appeal, having been refused permission to appeal by the Court of Appeal.  In response, the SFO filed a Notice of Objection on 7 April 2010.  The Court of Appeal refused the SFO permission to appeal (if permission were required) on 28 May 2010.
xxii)	On 8 June 2010, pursuant to an application made by a creditor, the Antiguan Court removed the former Joint Liquidators from their office.  Their removal was largely based on their conduct as such, and also in their capacity as the Antiguan Receiver-Mangers.  Their conduct was severely criticised by the court and resulted not only in additional costs being borne by SIB’s estate, but also delay in the realisation of its assets.  The order for removal of the former Joint Liquidators did not immediately appoint replacement liquidators, and the former Joint Liquidators remained in office as caretakers pending the Antiguan Court’s decision as to the identity of the new liquidators of SIB.
xxiii)	On 11 June 2010, the SFO filed its own application for permission to bring a cross-appeal in the UKSC.
xxiv)	On 1 July 2010, the Registrar of the UKSC wrote to the parties directing that an oral hearing of half a day (“the Preliminary Hearing”) be held, whereby the parties were directed to make submissions as to their right to appeal to the UKSC.  In the light of the uncertainty surrounding the office of the former Joint Liquidators, the Preliminary Hearing was stayed on 14 September 2010 by agreement between the SFO, the former Joint Liquidators and the UKSC.
xxv)	On 14 January 2011, the US District Court, Southern District of Texas, Houston Division, determined that there was “probable cause to believe” that the Restrained Assets in the UK were the proceeds of the fraudulent conspiracy charged in Criminal Cause No H-09-342, against RAS and others, and thus fell within the repatriation provisions of 21 USC 853(3)(4)(A), as property subject to criminal forfeiture.  In particular, the US District Court made the following findings of fact:
a)	On 18 June 2009, an information had been filed by the United States against Mr. Davis.  Count 1 of the information charged conspiracy to commit mail, wire and securities fraud through companies, including SIB and its parent company SFG, in violation of US law.  In the information, the United States provided notice of forfeiture to Mr. Davis.
b)	On 27 August 2009, Mr. Davis pleaded guilty to the criminal offences charged in the information, and a $ 1 billion preliminary order of forfeiture was entered against him.
c)	On 18 June 2009, an indictment was returned by a federal grand jury sitting in Houston, Texas, in Criminal Cause H-09-342 against RAS and others.  Count 1 of the indictment against RAS charged substantially the same conspiracy to commit mail, wire and securities fraud as Count 1 of the information against Mr. Davis.  The Notice of Forfeiture Section of the indictment returned by the grand jury specifically listed the Restrained Assets as being subject to forfeiture.
d)	Mr. Davis had admitted in his plea agreement that he served as Controller of SIB until approximately 1992, when he became the Chief Financial Officer of SFG, the parent company of SIB.  The information charged that Mr. Davis, among other duties:  regularly consulted with RAS about the financial status of SIB;  determined, based on the direction of Stanford, what revenue and assets numbers to report to investors and others;  and made investment decisions for SIB.  Based on the record, the US District Court found that as part of his duties, Mr. Davis was involved with, and exercised effectively control over, the Restrained Assets;
e)	Mr. Davis admitted in his plea agreement that SIB’s primary investment product was the certificate of deposit sold to investors based on fraudulent misrepresentations about SIB’s investments and performance.
xxvi)	Based on the record in the case, the US District Court found that “… there was reason to believe”:
a)	that the Restrained Assets consisted of money deposited by, or traceable to, deposits by investors who purchased the fraudulent SIB certificates of deposit;  and
b)	that the Restrained Assets constituted or were derived from proceeds traceable to specified unlawful activity, and were thus subject to forfeiture, and therefore fell within the repatriation of the relevant US law as property subject to criminal forfeiture.
xxvii)	The US District Court was further informed that the English court had allowed sums in respect of liquidation expenses to be disbursed to the former Joint Liquidators, with the undertaking that the former Joint Liquidators would repay such sums with interest upon the sale of certain property in Antigua, under the conditions provided by the relevant English court orders.  The US District Court found that any repayment of money disbursed to the former Joint Liquidators that originated from the Restrained Assets was property traceable to the Restrained Assets, and would likewise fall within the repatriation provisions referred to above, as property subject to criminal forfeiture.
xxviii)	The US District Court also noted that:
“… this was a case with many victims and billions of dollars in losses.  If the funds from the liquidation of the [Restrained Assets] were ultimately to be repatriated and placed under the US District Court’s authority in the custody of the United States Marshals Service, there were statutory forfeiture procedures in place to adjudicate any third-party interests that might be asserted in the property … and to provide for the return of the money to fraud victims, whether through the forfeiture process and/or through a court order of restitution ….”
xxix)	In light of the foregoing, the US District Court, inter alia, made the following order:
a)	that, in the event funds from, or traceable to, the Restrained Assets (including funds originating from the Restrained Assets which might be repaid by the former Joint Liquidators) were repatriated, the United States Marshals Service should receive and hold such funds pending an adjudication of any third-party interests that may be asserted in the funds, and a final judgment of forfeiture in the case, or until further order of the court.
xxx)	On 15 March 2011, pursuant to a further letter of request, dated 1 February 2011, from the DOJ (requesting that the UK authorities seek a variation of the New Restraint Order, in order to give effect to the order dated 14 January 2011 of the US District Court), the SFO applied to the Central Criminal Court for a variation of the New Restraint Order, to enable the Restrained Assets to be “repatriated to the United States of America” (“the Repatriation Application”).  For a variety of reasons (including the uncertainty over the position of the former Joint Liquidators), the Repatriation Application had not been listed as at the date of the hearing before me on 3 August 2011, and had effectively been stayed by consent.  I was not provided with a copy of this application, and, indeed, I was subsequently informed that no application notice had in fact been issued.  From what I was told about the application, it did not appear to be an application, under Articles 20 and 21 of ERO, to give effect to the external order, or to register it.  It was not suggested by the SFO in argument that the order made by the US District Court on 14 January 2011 was an “external order” as defined by Section 447(2) of the Proceeds of Crime Act which was capable of registration.
xxxi)	The former Joint Liquidators made strenuous attempts to appeal the Removal Order to the Eastern and Caribbean Court of Appeal, and to stay its execution.  After various appeals and applications, the detail of which it is not necessary for me to recite, their removal was finally confirmed by an order of the Antiguan Court dated 12 May 2011 (“the Appointment Order”), by which the Removal Order was confirmed and the Joint Liquidators were appointed in place of the former Joint Liquidators.  However, according to the Joint Liquidators’ evidence, the SIB estate was effectively mothballed for at least the period between the making of the Removal Order, on 8 June 2010, and 12 May 2011, given the caretaker status of the former Joint Liquidators in the intervening period.
xxxii)	On 5 July 2011, following the appointment of the Joint Liquidators, the Preliminary Hearing was fixed for 25 January 2012.  The UKSC has subsequently indicated in correspondence that it may, during the Preliminary Hearing, also hear argument as to the merits of an application for leave to appeal, if leave is required.
The Present Application
11.	Paragraph 5 of the New Restraint Order provides as follows:
“5.	SIB shall be entitled to its reasonable living and legal expenses but before spending such monies it shall notify the SFO of the source of the funds and the amount to be spent.  In the event that the amount to be spent is not agreed by the SFO a Judge of the Crown Court shall determine the spending limit after hearing representations from the parties.”
12.	In addition, paragraph 5 of the Court of Appeal’s order dated 25 February 2010 provides:
“SIB be at liberty, if so advised, to apply to the Crown Court pursuant to article 9(2) of the [ERO] for an order varying the New Restraint Order so as to include an exception to it, in accordance with article 8(2) of the ERO, in respect of the costs and expenses of the liquidation (other than the Costs of the Restraint Order Proceedings).
13.	On 11 July 2011, pursuant to a resolution of SIB Creditors Committee dated 7 July 2011, the Joint Liquidators issued an application, pursuant to paragraph 5 of the order dated 25 February 2010, and paragraph 5 of the New Restraint Order, for a variation of the latter, in order to obtain loans from the Restrained Assets up to an amount of $ 20 million, which the Joint Liquidators claimed were necessary in order to fund the ongoing liquidation and realisation costs of SIB’s assets in the best interests of its creditors.
14.	In essence, the application sought a variation of the New Restraint Order in order to permit the Joint Liquidators to borrow $ 20 million from the Restrained Assets on terms that the loans would be repaid by the Joint Liquidators to the Restrained Assets from the proceeds of any net realisation of the estate.  The principal terms of the order sought were as follows:
i)	a “line of credit” to be made available to the Joint Liquidators in the sum of $ 20 million;
ii)	an immediate facility of $ 5 million to address current funding needs of the liquidation;
iii)	any further drawdowns in excess of $5 million to require previous notification to the SFO;
iv)	all drawdowns to attract interest payable to the Restrained Assets of 5.4% per annum;
v)	all drawdowns to be repaid with interest, by a 10% dividend on recoveries by the Joint Liquidators beyond those already agreed to be paid under previous arrangements.
The Joint Liquidators’ evidence in support of the application
SIB’s assets or potential assets
15.	In support of their application, the Joint Liquidators provided evidence in relation to the nature and state of SIB’s assets, their plans for the future conduct of the liquidation, in order to maximise realisations, and the liquidation’s funding needs.  That evidence included two affidavits from Mr. Wide, dated respectively, 10 July and 2 August 2011.  I summarise the relevant evidence below.
16.	The Joint Liquidators’ evidence in support of the application showed that after the appointment of the SEC Receiver and the former Joint Liquidators to their respective offices in February 2009, the known liquid assets of the estate were frozen by various government authorities, pursuant to various local proceeds of crime preservation orders made pursuant to Mutual Legal Assistance Requests from the DOJ.  The assets frozen in the United States were frozen by virtue of the 17 February 2009 SEC Receivership Order.  As at August 2011, the assets of the estate subject to restraint orders consisted of the following assets.
United States
17.	The assets of SIB situated in the United States (in the form of cash deposits) were of an approximate value of $ 100 million, and were under the control of the SEC Receiver.  Therefore they were currently unavailable to the Joint Liquidators.
Switzerland
18.	Swiss assets with an approximate value of $ 140 million were held at various financial institutions.  These assets were substantially in the form of investments in privately held hedge funds.  Although, in contested administrative proceedings with the SEC Receiver before the national regulator of financial institutions in Switzerland, the former Joint Liquidators had obtained recognition in Switzerland, the DOJ successfully requested that a Swiss criminal investigating magistrate restrain those funds as the proceeds of crime.  As such, those assets were currently unavailable to the Joint Liquidators.
Canada
19.	In Canada, the Toronto Dominion Bank in Toronto (“TD Bank”) held approximately $ 18 million of SIB deposits which were the subject of proceedings whose object was for those funds to be transferred by the Attorney General of Ontario, in favour of the DOJ.  As such, the Joint Liquidators had no access to these funds.
England and Wales
20.	In England and Wales the New Restraint Order stated that the Restrained Assets had a value of approximately $ 100 million as at the date of that order.  
21.	Since 24 June 2011, the Joint Liquidators’ solicitors, Lawrence Graham, had been in correspondence with the financial institutions listed in the schedule to the New Restraint Order as holding SIB’s assets.  The evidence produced at the hearing on 4 August 2011 showed that the value and nature of SIB’s assets held by the institutions as at that date were approximately as follows:
i)	with Credit Suisse UK Ltd (“CSUK”):
a)	held at Pershing Securities Limited as custodian to SIB assets with CSUK:  Cash:  €124,725.59;  $ 87,818,399;  and £351,439.25;  
various securities, apparently invested in hedge funds, but unvalued;
b)	held at Pershing Securities LLC as custodian to SIB accounts with CSUK:
Cash, Money funds and FDIC Deposits:  $ 487,891.72;  Securities (valued at 30 June 2011):  $ 539,510.59;
With HSBC Bank plc:  Cash:  €2,694,258.89;  $ 54,352.45;  CHF87,457.68;  £3,270.94
ii)	With Marex Financial Limited:  $ 299,851 (this appears to be a cash balance which has remained at that figure since 31 March 2009, without any addition or deduction by way of interest or otherwise).
Antigua
22.	The Joint Liquidators hold Antiguan real estate assets with a reported “fire sale” value of approximately $ 45 million.  These assets include the following:
Description of Property	Estimated fire sale value	
Guiana Island, Crump Island and the Crump Peninsula (1,600 acres)	$25 million	
Pelican Island (29 acres)	$15 million	
ECAB Bank Building	$4 million	
99-year lease over the Antigua Athletic Club, St John’s Parish	$1 million	
TOTAL	$45 million	
23.	Based on professional advice, the Joint Liquidators believe that, over the next two to five years, the value of these assets may be improved by the use of a plan of modest improvement (including the procurement of pre-development plans and government approvals) packaging and robust international marketing.  They tentatively project that the value of the above real property may be improved, by the making of such modest improvements, and by means of a marketing and sale plan, to between $ 80 - 100 million (or more, if the market improves over time).  However, they state that any implementation of a plan professionally to package and market the Antiguan properties would require access to approximately $ 3.5 million in working capital.
24.	The Joint Liquidators refer, by way of specific example, to Pelican Island, the second property in the table above.  This they describe as “an impressive 29 acre limestone ‘tabletop’ Caribbean island with 360 degree views and pristine beaches”.  According to the professional advice which the Joint Liquidators have received, an investment of $ 2.5 million on Pelican Island to build a road and to upgrade island utilities would allow “lot” sales to be effected, improving the marketability of the land and yielding a projected $ 40 million in revenue to the estate over three to four years, thereby improving the recovery to creditors by $ 23.5 million, and almost tripling the “fire-sale” value.
25.	The Joint Liquidators’ evidence also refers to a portfolio of approximately 34 separate parcels of Antiguan real estate held by:  Maiden Islands Holdings Limited (“Maiden”);  Gilberts Resort Development Holdings Ltd (“GRDHL”);  Stanford Development Company Limited (“SDCL”);  and Stanford Hotel Properties Limited (“SHP”), Maiden, GRDHL, SDCL and SHP being collectively referred to as “SDC”.  SDC is beneficially owned by RAS, but currently controlled by a person identified as his girlfriend, Ms Andrea Stoelker (“Ms Stoelker”) via a power of attorney given in favour of Ms Stoelker while RAS was detained in a US Federal Prison.  RAS has apparently attested that he is the owner of the four companies which make up SDC.
26.	The Joint Liquidators are of the view that the SDC assets are likely to be held on constructive trust for the estate on the basis that RAS failed to account for approximately $ 7.8 billion of SIB assets allegedly misappropriated by him.
27.	The Joint Liquidators’ evidence, based on their investigations to date, shows that SDC’s asset portfolio in Antigua includes:
i)	seven office buildings, a daily newspaper printing facility, two warehouses and twelve completed single-family residences in a subdivision called Cedar Valley Springs;
ii)	the Crabs Port seaport facility in which USD$ 55 million has been invested;
iii)	two restaurants and an international cricket ground;
iv)	Maiden Island, including a harbour dock for Maiden Island located on the Antiguan mainland and called Barnacle Point, in which $ 5 million was invested;
v)	A six-year old airplane hangar and fixed base operating facility for private aircraft with a VIP lounge, conference rooms and offices on 18 acres of land next to the VC Bird International Airport (“the Airport”) in Antigua, in which an estimated $ 20 million has been invested.
vi)	a 300-space car park at the Airport;
vii)	some $ 2 million in building materials and several hundred thousand dollars in new furniture and some heavy construction equipment;  and
viii)	other miscellaneous parcels of land;
together, “the SDC Properties”.
28.	The evidence, based on investigations to date, also shows that the combined fire-sale value of the SDC Properties is approximately $ 70 million (against which there appear to be approximately $ 9 million of third party liabilities), and that, although the potential realisable value of the SDC Properties was unknown at this stage, the Joint Liquidators believe that the value of these assets could be significantly increased by the completion of certain modest improvements.
Actions of the Joint Liquidators since taking office, and their plan of action for the estate
29.	Since entering into office, the Joint Liquidators have met or communicated with representatives of a number of law enforcement agencies in various jurisdictions.  The Joint Liquidators properly took the view that, to the extent possible, resources should not be spent on litigation amongst competing insolvency officeholders and government agencies who either do share, or who ought to share, a common goal of delivering as much value to the 21,000 creditor victims of SIB’ insolvency as possible. 
30.	The Joint Liquidators have obtained the views and advice of SIB’s creditors, through the establishment of an interim Creditors Committee (the “Creditors Committee”).  It appears that there is no statutory framework for the establishment and constitution of a Creditors Committee to provide advice or guidance to office holders in the liquidation of an offshore bank.  However, the Joint Liquidators took the view that it is critically important that, so far as possible, the Liquidation should be creditor-driven, in the sense that the views of creditors should be given appropriate weight as to the manner in which the liquidation should be conducted.
31.	The Creditors Committee consists of six members of the community of approximately 21,000 creditors (approximately 99.7% of which are SIB depositors, and thus victims of the alleged fraud).  The evidence did not make it clear whether this figure was 99.7% by number of creditors, or by value.  Subsequently, I was informed that further investigation by the Joint Liquidators has established that, of all claims, those by victims represent at least 99.9% by value and 99.7% by number.  The Creditors Committee is apparently representative of the disparate geographical and financial nature of the creditors and comprises, thus far, some five creditors based in, respectively, Switzerland, the United States, Panama, Canada, and Venezuela, and one lawyer from Minneapolis who acts under a proxy for a depositor group from Mexico.  A seventh member was also being sought from Antigua, as at the date of the hearing.
32.	In all, the members of the Creditors Committee represent some $ 87,737,676.77 in value of SIB’s outstanding certificates of deposit (including accrued or fictitious interest).  The purpose of the Creditors Committee is to provide a forum for Creditors to provide their views to the Joint Liquidators and to assist the Joint Liquidators to make decisions in relation to such matters as:  a) the risk of expending the estate’s cash resources in the pursuit of recoveries or realisations;  and b) the process of recovering assets or pursuing claims against third parties.
33.	For the purposes of facilitating discussions with creditors and others, the Joint Liquidators have compiled a report styled – “Stanford International Bank Limited (in Liquidation) – Action Plan for Recovery Optimisation for Creditors” dated 7 July 2011 (the “Action Plan”).  The Action Plan sets out a description of:  a) the Joint Liquidators’ work objectives;  b) achievements to date;  c) preliminary findings;  and d) a list of actions required to be undertaken.  A budget or forecast of the estate’s estimated costs under three different scenarios is set out in the action plan.  Mr. Wide states that, in considering, and costing the Action Plan, he has drawn upon his 33 years of experience (which include presiding over the liquidation of many offshore banks in the Eastern Caribbean with the same or similar issues) and that of his advisors, who have similar experience.  On this basis, the Joint Liquidators consider that the median forecasted costs of the estate to be in the region of $24.2 million, but that the lowest amount reasonably required to ensure the proper and effective administration of the estate, and meet the goals and purposes of the Action Plan (specifically the urgent matters which have recently arisen), is $ 20 million.  The Joint Liquidators state that the funding sought under the current application was intended to provide sufficient working capital to allow the estate to achieve the goals and purposes as identified in the Action Plan.
34.	For a number of reasons set out in their evidence, the Joint Liquidators consider that they require US$20 million of working capital for the estate as a matter of importance and urgency.  These reasons include the fact that it is difficult to commence complex, high-value third party litigation against deep-pocketed defendants unless there is certainty that the other side cannot run the fees to the point the estate is unable to continue.  The Joint Liquidators also took the view that, given the long term nature of much of the asset base, short term “top up” cash realised from recoveries is unlikely to be available to fund the litigation until the Joint Liquidators are well down the road in their work.  The $20 million of funding requested was expected to be adequate to make the estate self-sufficient, as set out in the Action Plan (and budget).  
Funding received into the estate
35.	As a result of previous orders made by the English court, the following amounts, in a total of approximately $ 1.5 million, were previously released to the former Joint Liquidators from the Restrained Assets:
i)	In August 2009, the Court of Appeal allowed a variation of the Original Restraint Order, to allow the Applicants to withdraw US$889,800 from the Restrained Assets to fund the costs of the liquidation for three months;
ii)	in April 2010, the SFO agreed to a consent order whereby approximately $ 87,000 per month was released to the former Joint Liquidators to fund the liquidation for six months (March to August 2010);
iii)	in September 2010, the SFO agreed to a further consent order whereby a single payment of $ 75,000 per month was released to the former Joint Liquidators to fund the liquidation for September 2010;
iv)	on 22 March 2011, the SFO agreed to a consent order for the release to the former Joint Liquidators of $ 223,200 to be distributed in twelve weekly instalments of $ 18,600 “to fund the ongoing management of the liquidation ...  on a caretaker basis and to facilitate an orderly handover to the replacement liquidators once in office”.  The last of these payments was received by the Joint Liquidators’ solicitors, Lawrence Graham LLP on 15 June 2011.
36.	The funds provided to the former Joint Liquidators from the Restrained Assets have been almost entirely consumed, the balance of funds currently held by the estate being approximately EC$ 50,000.
37.	All the above sums were released from the Restrained Assets on terms that they were loaned to the liquidation estate, to be repaid to the Restrained Assets with interest at the rate of 5.4% per annum from the proceeds of sale of the realisations of any of the Antiguan properties comprised in the liquidation.
38.	With the exception of approximately $ 310,000 that was held on deposit at the Bank of Antigua upon the appointment of the former Joint Liquidators, the former Joint Liquidators were unsuccessful in recovering any material liquid assets of the estate.  In the circumstances, as at August 2011, the estate had no access to liquid funds save for approximately $ 27,000 per month paid as rent for an office premises occupied by Eastern Caribbean Amalgamated Bank (“ECAB”), as successor to the RAS-owned Bank of Antigua.  
The value of recoveries by the estate to date
39.	In the period from 19 February 2009 to May 2011, during which the former Joint Liquidators were in office or acting as caretaker liquidators, the estate had not made recoveries of any material value.  A total of $ 541,110 was recovered, made up as follows:
i)	Sale of three cars, one golf cart and one coach 	$ 112,592
ii)	Sale of office furniture 					$ 118,518
iii)	Recovery of cash bank deposit at ECAB Bank	$ 310,000
The estate’s urgent need for funding
40.	The Joint Liquidators’ evidence showed that the estate required urgent funding in order to address the following principal, but non-exhaustive, dangers to the estate.
i)	Dissipation of RAS assets controlled by Ms Stoelker
41.	The Joint Liquidators’ evidence showed that there was a genuine concern that the SDC properties were at risk of being dissipated, and that proceeds of their unauthorised sale might be removed from Antigua.  In summary, the evidence showed that Ms Stoelker was attempting to sell the various SDC properties on “cash and carry” terms, without proper documentation and at deeply discounted prices.  Ms Stoelker had also embarked upon a campaign calculated to dissipate rents realised from various SDC Properties.  Indeed, Mr. Wide’s second affidavit referred to the fact that because of the serious risk of assets being lost to the estate or dissipated, the Joint Liquidators obtained, on 28 July 2011, a wide-ranging ex parte freezing or subject-matter preservation order against RAS, Ms Stoelker and the four SDC companies.  This necessarily gave rise to the need to incur further costs and legal fees in relation to preparation for what might be contested applications on the return date.  It also demonstrated that, at least on an ex parte basis, the Antiguan Court considered that the Joint Liquidators had a good arguable case that the SDC properties are held on constructive trust for the estate.
ii)	Realisations of real estate assets at optimal value
42.	The Joint Liquidators’ evidence also showed that the land assets currently under the ownership of the estate and under the control of the Joint Liquidators, when combined with the SDC Properties, should represent $ 115 million in combined fire sale value to the estate.  However, with the benefit of funding, the estate would avoid the need to make a fire sale of its land assets and, instead, would be able to obtain the advice of real estate agents and to improve, package, market and realise these assets at their optimal value.  The Joint Liquidators estimate that a combined value of upwards of $180 million to $200 million in realisations might be achieved for the estate if:  a) the SDC Properties were rescued and recovered;  and b) the estate were adequately capitalised, thereby averting the need for a fire sale of assets.
iii)	Management of risk in respect of restrained Swiss and UK assets
43.	The Joint Liquidators’ evidence also showed that the Restrained Assets located in London and SIB’s assets restrained in Switzerland (which have a combined value of approximately $ 250million) posed risks to the estate that required active management.  It appeared that the majority of these assets were represented by shares in the capital of privately held or illiquid hedge funds or cash.  Whatever their actual consistency, it was clear they needed active management.  As a consequence of the restraint proceedings in this jurisdiction and Switzerland, the Joint Liquidators were unable actively to manage the investment risks attaching to those assets, with the result that they do not have the ability to liquidate and/or manage assets and currency risks, in order to obtain optimal realisations, or avoid unnecessary losses, for the benefit of creditors.
44.	As a further consequence of the restraint proceedings, substantial investment advisory fees were still being charged by the Swiss banks supposedly to “manage” SIB’s assets frozen in that jurisdiction.  In 2010, over $ 750,000 was charged by financial institutions for investment advisory fees, despite the fact that, due to the restraint proceedings, no investment advice could have been provided or received.  The Joint Liquidators estimated that, by the end of 2011, $ 2.25 million of estate assets would be dissipated via the payment of possibly unnecessary investment advisory fees in respect of SIB’s Swiss assets.
45.	By way of example, within approximately one week of entering office on 12 May 2011, the Joint Liquidators were asked by one of the custodians of the Restrained Assets to make a risk decision pertaining to one of the investments of SIB in London.  The investment was in an illiquid and privately-held hedge fund.  According to the relevant custodian, a third party had offered to acquire the securities of SIB in the hedge fund (as well as other securities issued by the same fund).  As the investment was illiquid, a decision not to sell the securities could have resulted in the locking-down of the asset for an indeterminate period of time.  The Joint Liquidators did not have access to adequate information to reach an informed decision.  Furthermore, even if they had reached an informed decision, there was no way of implementing it because the presence of the restraint order over the assets meant that the custodian would pay no attention to instructions given by the Joint Liquidators.  As it happens, one of the Joint Liquidators subsequently became aware of the nature of the redemption opportunity due to the fact that he acted as an officeholder over an insolvent company which faced the same question from the same hedge fund in London.  However, a failure to redeem the investment in question had resulted in a lockdown of SIB’s investment, effectively, for an additional three years.  
46.	The evidence showed that, at present, the Joint Liquidators were unable to consider what risks were being undertaken with these assets, as they had inadequate information with which to assess the position.  
iv)	Third party claims under investigation
47.	The views of the Joint Liquidators were that relatively small cash resources could be used to generate significantly larger recoveries for the benefit of creditors, in particular by the investigation and pursuit of viable claims against third parties.  Their evidence showed that there were a number of claims that might generate significant recoveries for the estate.  These included constructive trust claims against banks and others (in some cases where urgent limitation issues are involved).
48.	There was also an outstanding application of the former Joint Liquidators to seek recognition in the United States of the Antiguan liquidation as the “foreign main proceeding” of SIB.  That application has been fully prepared (at an apparent cost of approximately $ 2 million to date in legal fees to the estate).  The Joint Liquidators have been advised that the estate should urgently proceed with this Chapter 15 recognition case and that it should be successful.
49.	The Joint Liquidators were in negotiations with the SEC Receiver to seek to avoid the cost of a contested Chapter 15 hearing and appeals.  The parties were currently in the process of drawing up an outline of the possible terms of a Trans–Border Insolvency Protocol for the estate and the SEC Receivership with the aim of harmonising the two estates, avoiding costly litigation, allowing for the Antiguan estate to gain Chapter 15 recognition by consent, and augment the rights of all creditors in all relevant jurisdictions.  The estate was in urgent need of funding to continue with this application.  
50.	There were approximately $ 500 million of outstanding claw-back claims being pursued by the SEC Receiver and by his Investors’ Committee, in relation to sums that have been wrongly paid to third parties as “net winners” in the Ponzi scheme (the “Claw-back Claims”).  On the basis of the advice of US counsel to the estate, the Joint Liquidators apparently had better standing to pursue these claims against the defendants than the SEC Receiver.  Indeed, some of the defendants are defending these actions on precisely this point.  The Joint Liquidators required funding urgently to consider the merits of their intervention in such cases or to institute fresh claw–back proceedings before the expiry of relevant limitation periods.
Other funding options available to the estate
51.	The Joint Liquidators took the view that, were the liquidation to remain without funding, creditors’ interests would suffer irreparable damage as a result of dissipation of potential estate assets and the expiry of limitation periods in respect of claims of substantial value which appeared to be available to the estate.  
52.	The Joint Liquidators had explored alternative methods of funding the liquidation.  If funding were not to be available from the Restrained Assets, the Joint Liquidators would be forced to agree to a $ 20 million facility with a special purpose vehicle called Sorrell Investments Limited, a Guernsey company (“Sorrell”), formed:  by a) an asset–backed lender with approximately $ 5 billion under management;  and b) a publicly-listed professional litigation funder with approximately $ 300 million under management (the “Sorrell Facility”).  The Sorrell Facility would be expensive, but the Joint Liquidators considered that they would have no choice but to utilise it, absent funding from the Restrained Assets, on the basis that expensive funding would be better than no funding at all.  In order to protect the estate against the consequences of a lack of operating capital, the Joint Liquidators had signed a term sheet with Sorrell for the provision of loan funding which, subject to certain conditions, had been made available to the estate at an expensive and compounded rate of interest with certain rights to earn additional return.  The Sorrell Facility (if utilised) would inevitably result in a significant cost to the estate.
53.	Sorrell was identified following a detailed search of the market by the creditor who successfully petitioned for the removal of the former Joint Liquidators.  The proposal to obtain a loan facility from Sorrell had been approved by a resolution of the Creditors Committee dated 7 July 2011.  On 11 July 2011, the Antiguan Court approved the Sorrell Facility term sheet as a means of funding the liquidation, if the Joint Liquidators were not able to gain access to $ 20 million of SIB’s own funds from the Restrained Assets in the UK (or elsewhere).  Sorrell had scheduled Friday, 5 August 2011 for the date of completion of its funding.  The cost of borrowing from Sorrell would be extremely high, and unfavourable to the estate.  As set out in the Action Plan, the projected cost of the Sorrell Facility under the three separate recovery scenarios would be as follows:
Scenario	‘A’	‘B’	‘C’	
Assumed Value of all Recoveries for the estate	$100m	$240m	$650m	
Projected Cost Of funding by Sorrell	$13.789m	$30.039m	$73.789m	
cost of funding as a percentage of recoveries	13.8%	12.7%	11.3%	
Funding from the Restrained Assets
54.	If the Joint Liquidators were granted the relief sought under the application, they took the view that it would be in the best interests of the creditors for the Joint Liquidators to ‘break’ the provisions of the Sorrell Facility term sheet and pay a $ 500,000 break fee.  For that reason, it was necessary for the application to be heard before 5 August 2011, the date by which the Sorrell Facility had to be concluded or terminated.
Conclusions drawn by the Joint Liquidators on their evidence
55.	In conclusion, the Joint Liquidators put forward the following principal reasons as to why the estate required funding on an urgent basis:
i)	The proportionately small recovery by creditors if the Action Plan were not to be implemented
56.	Apparently, SIB represents the second largest alleged Ponzi investment scheme in modern financial history.  The Joint Liquidators’ best estimate of the numbers of creditor victims of this apparent fraud numbers some 21,000 people from approximately 140 countries.  The aggregate losses of SIB’s depositors, as recorded on SIB’s balance sheet, total some $ 7,173,937,232.79.  Known SIB assets subject to restraint proceedings or frozen and held by either the Joint Liquidators or the SEC Receiver were approximately as follows:
Location	Nature of Asset	Value	
Switzerland	Substantially illiquid investments in privately held hedge funds – frozen by proceeds of crime restraint orders.	$ 140m	
UK	Substantially investments in privately held hedge funds.	$ 110m	
Canada	Cash deposits at TD Bank – frozen by a local proceeds of crime restraint order.	$ 18m	
Antigua	Land held by the SIB estate in SIB’s name.	$ 45m	
USA	Cash deposits accumulated in the hands of SEC Receiver Ralph Janvey in Dallas, Texas.	$ 100m	
TOTAL		$ 413m	
57.	On the assumption that no costs were incurred in the delivery of such $ 413 million in assets, and that no additional efforts were applied to effect or increase recoveries through:  i) asset tracing;  ii) litigation against “knowing assistants” or “knowing recipients” of trust property;  iii) claw-back litigation against “net winners” in the alleged Ponzi scheme;  and iv) that no improvements or professionally packaging or marketing efforts were applied to to the illiquid assets of the estate, the optimal dividend return for a single creditor through a unified distribution scheme (which has yet to be arrived at), would equate to approximately 5.7%.  The Joint Liquidators took the view that there was a need substantially to improve upon what would be a very poor return for creditors, and that urgent action ought to be taken to achieve such a result.  However, this could only be done with appropriate funding.
ii)	Performance of the former Joint Liquidators
58.	The minimal realisations of the former Joint Liquidators during their period of office could be compared with the figure of $ 18 million in outstanding professional fees and disbursements which they claim to be owed.  The Joint Liquidators took the view that the most serious challenge facing the estate to date has been the historical absence of any funding, and that (although there were significant failures on the part of the former Joint Liquidators) there was a direct and proximate link between the lack of funding and the poor performance of the Joint Liquidators in vindicating creditors’ rights.  The mothballing of the estate for the last twelve months, whilst the former Joint Liquidators contested their removal, and during which they were unable to take material decisions regarding the estate, had also exacerbated the need for action to be taken promptly.  
iii)	Work of the Joint Liquidators and their advisors and current expenses of the estate
59.	Since entering office on 12 May 2011, the Joint Liquidators had, with the assistance of their legal team, been able to identify and prioritise the most exceptionally urgent tasks required to preserve rights for the estate.  The Joint Liquidators took the view that, if funding were not to be provided to the estate in the immediate future, work would need to be drastically curtailed, which would have a detrimental effect on the interests of the 21,000 creditors.  
iv)	Asset flight, dissipation and wasting
60.	As referred to above, the Joint Liquidators took the view that an estimated $ 70 million of potential estate assets were presently being dissipated by Ms Stoelker at the apparent behest of RAS.  Even if all the Joint Liquidators did was to apply part of any funding obtained to continue the litigation already started to freeze and recover these assets, that would likely advance the interests of creditors by some $ 50 million.
v)	Deteriorating potential claim against third parties
61.	The Joint Liquidators took the view that possibly the most valuable type of assets held by the estate consisted of its portfolio of contingent claims against third parties.  In order to preserve these assets, immediate action was required, as necessary:  i) to give notice of and/or to institute these claims;  ii) to be able to support them financially;  and iii), within a very short period of time, to prevent summary dismissal.  
vi)	Claw-Back Claims
62.	As set out above, US-based litigation (i.e. $ 500 million in claw–back claims) was continuing on an apparently unsound basis by the SEC Receivership’s Investors’ Committee.  This might prevent the Joint Liquidators, who may have better standing as the proper party plaintiff, from pursuing these claims, and thus potentially wasting these potential recoveries.  These claims were expected to amount to in excess of $250 million in recoveries.  
vii)	Recognition under Chapter 15
63.	There was also an urgent need for the Joint Liquidators to have funding to:  i) complete the process of obtaining Chapter 15 US Bankruptcy Code recognition of the estate as the “foreign main proceeding” (hopefully on an uncontested bases);  ii) which would automatically result in an imposition of a nationwide stay of all litigation brought by or against SIB in the US;  and iii) either intervene in and take over the prosecution of these claims, or start a series of claw-back claims.  
viii)	The apparent need to repair the claims adjudication process
64.	There was a statutory requirement in Antigua for all creditors’ claims to be summarily adjudicated upon by the Joint Liquidators.  The Joint Liquidators were concerned that the summary claims adjudication process of the former Joint Liquidators may not comply with the requirements of the Insolvency Rules (1986) (which are applicable in Antigua) and further that the amounts “agreed” are inappropriate in the context of a Ponzi type fraud.  Specifically, accrued, but unpaid, “interest” should not be credited and all claims should be valued on a pure net cash loss basis.  If this is not done, “net winners” can end up unjustly sharing in scarce funds to be distributed to “net losers”.  The claims adjudication process needs to be resolved so that the adjudication of creditors’ claims can recommence with some alacrity as creditors are properly concerned as to the quantum of the claims against the estate.  Funding is required urgently to determine whether the antecedent claim processing system must be unwound.  
ix)	Adjudication of former Joint Liquidators’ $18 million bill of costs
65.	The time deadline of 1 September 2011 for the Joint Liquidators to review, and, if considered appropriate, to file evidence in opposition to the former Joint Liquidators’ claim for approximately $18 million outstanding charges and disbursements, was fast approaching.  This matter required proper attention and would be likely to be contested by the Joint Liquidators, with a view to protecting the position of SIB’s creditors.  An assessment hearing was to be fixed in October 2011.  
x)	The need to avoid multiple claims adjudication and distribution processes
66.	The Joint Liquidators’ evidence under this head was as follows:
“It is necessary to assess the cost of multiple claims adjudication and distribution processes where there may be as many as 21,000 Creditors’ claims to adjudicate and pay out.  To duplicate this process more than once is unnecessary.  
However, there is a risk that as many as four parallel claim distribution systems may end up being pursued in this matter through:  (i) the SEC Receivership;  (ii) the estate;  (iii) the DOJ and, possibly;  (iv) the Attorney General of Ontario.  Such a multiple victim/creditor distribution model is estimated to cost approximately $16 million to $20 million in the aggregate.  This should be juxtaposed against a globally unified process of less than $5 million in projected administrative and claim adjudication costs.  Discussions to date with the SEC Receiver suggest a unified, global claim adjudication and distribution process is possible as between the SEC Receivership and the estate.  Thus, the cost of litigation to recover the “frozen funds” is expected to be less than the cost of a multi-distribution process, especially one where there are no cross–border protocols in place, and where the funds become the property of Government, and may be subject to other claims or fees in the United States by reason of the substantive consolidation of RAS’ balance sheet with SIB’s and five others’ (such as a $226 million IRS claim against RAS).  Further, amongst other concerns, there is the risk inherent in having disparate claims adjudication and distribution processes generating conflicting admitted claim values.  Funding is urgently required to (i) support the present work on a consensually built protocol to harmonise the SEC Receivership and the estate and/or, if necessary (ii) litigate to avoid the cost of a multi–headed claims adjudication and distribution model.”
xi)	Asset tracing
67.	It would appear that:  a) the former Joint Liquidators did not complete any asset tracing work;  and b) the SEC Receiver's asset tracing work had been frustrated by reason of his having had no access to SIB's records in the UK and Switzerland.  Reports indicated that hundreds of millions of US dollars poured out of SIB’s bank accounts in Europe in the months leading up to its failure.  The risk of “leakage” in a major fraud case required comprehensive asset tracing to be pursued as far down the value chains as may be feasible.  This represented a discrete strand of work for the Joint Liquidators requiring urgent attention and funding.
xii)	Urgency placed on the Joint Liquidators by the Sorrell Facility and by the circumstances facing the estate
68.	The Sorrell Facility had effectively to be accepted or rejected by 5 August 2011.  It was therefore necessary for the current application to be resolved by then.
The position taken by the SFO in the period before the hearing on 3 and 4 August 2011
69.	Prior to 29 July 2011, the SFO, the Joint Liquidators and their solicitors, Lawrence Graham, had been sensibly engaged in discussions in an attempt to agree the terms of a funding order.  It is not necessary for me to rehearse the detailed course of those negotiations (which were conducted on an open basis).  The negotiations started with a meeting between the parties on 18 May 2011, which was followed by correspondence and exchanges of draft orders, in which the parties appeared to have agreed a proposal in principle, whereby:
i)	funding of $ 20 million would be made available by way of loan to the Joint Liquidators from the Restrained Assets, on which interest at 5.4% per annum would be payable;
ii)	the Joint Liquidators would repay the funding to the Restrained Assets by means of a dividend from future realisations from the estate;  and
iii)	the SFO’s application to repatriate the balance of the Restrained Assets would be heard at some future date convenient to both parties.
70.	As at 27 July 2011, the position on the correspondence was that the proposed draft order had been agreed, with only a very few material points outstanding still to be resolved, such as:
i)	whether the initial drawdown figure was to be $ 4 million or $ 5 million;
ii)	whether the dividend mechanism used to repay monies drawn down was to be set at a rate of 10% of future recoveries or some other rate;
iii)	the wording of a provision for the investment management of the Restrained Assets (which had already been agreed in principle).
At no stage during these negotiations did the SFO indicate that its consent to the funding order was contingent upon the Joint Liquidators’ agreement to the immediate repatriation to the DOJ of the Restrained Assets without a further order of the English court.
71.	However, on 29 July 2011, for the first time (and notwithstanding the attitude it had previously adopted in correspondence), Mr. Philip Mobedji of the SFO stated to the Joint Liquidators that its formal position was that the SFO would oppose the application unless the Joint Liquidators agreed to the immediate repatriation of the balance of the Restrained Assets to the DOJ in the United States.  When the Joint Liquidators indicated that they could not “easily” agree to such a suggestion (not least because it would pre-empt not merely any appeal to the UKSC, but also the Joint Liquidators’ opposition to the Repatriation Application, and any future opposition to the registration of an external order), Mr. Mobedji stated that, in that case, the SFO would oppose the funding application in its entirety.
72.	On the same date (and notwithstanding that 29 July 2011 was the date which I had ordered for the lodging of skeleton arguments with the court), the SFO served a 30-page affidavit of Mr. Tanvir Tehal, a barrister employed by the SFO, which stated that it was made, not only in opposition to the Joint Liquidators’ application for interim funding in the sum of $ 2 million, but also, apparently (see paragraph 1 of the affidavit), in support of an application to vary the New Restraint Order to enable the Restrained Assets to be repatriated to the United States of America.  Included amongst the exhibits to this affidavit were affidavits from a US lawyer, Mr. Addy Jacob de Kluiver.  In addition, the SFO filed a 28-page skeleton argument which not only stated that the DOJ:
“… fundamentally disagrees with the release of any of the funds in the London accounts and does not consent to the SFO’s proposed course of action [i.e. to make $ 20 million available by way of funding].”
but also appeared to address the substantive Repatriation Application.  That skeleton also appeared to attempt to mis-characterise the failure of the parties to agree terms, as something brought about by the Joint Liquidators’ alleged refusal to agree to the immediate repatriation of the balance of the Restrained Assets, without the need for any hearing of the Repatriation Application.  That had clearly never been a term of the negotiations:  see, for example, Mr. Mobedji’s letter and email of 25 July 2011.
73.	At the hearing on 3 August 2011, I was told by Mr. Andrew Mitchell QC, leading counsel for the SFO, that the apparent volte-face on the part of the SFO from the position which it had adopted in correspondence, was due to the fact that it had been:  “unable to obtain instructions from the DOJ” until a very late stage.  I regarded this as a highly unsatisfactory method of conducting litigation, which has undoubtedly and unnecessarily increased the Joint Liquidators’ costs of the application, and resulted in the court not having before it a clear statement of the respective legal contentions of the parties addressed to the relevant issues.
74.	Mr. Mitchell did make clear, however, at the start of the hearing on 3 August 2011, that, despite the impression given by Mr. Tehal’s affidavit and the SFO’s skeleton argument, that he (Mr. Mitchell) was not suggesting that the SFO’s Repatriation Application should be heard at the August hearing.
75.	That was clearly a correct concession for the SFO (albeit somewhat belatedly) to make.  It is clear, not least from the Court of Appeal’s judgment at paragraph 105, per Sir Andrew Morritt, Chancellor (and, indeed, from the SFO’s letter dated 2 June 2011), that the Joint Liquidators were to be afforded a proper opportunity to resist the SFO’s Repatriation Application.  This the Joint Liquidators clearly had not had, given the very short notice of the SFO’s apparent wish to lift the stay on the Repatriation Application, and have it dealt with by the court at the August hearing.  It was common ground that both parties’ submissions in relation to the funding application were to be without prejudice to any future contentions which they might wish to put forward in relation to the Repatriation Application, or the appeals (or potential appeals) to the UKSC.
76.	As a result of the last-minute service of the SFO’s evidence, further evidence was served by the Joint Liquidators.  This included affidavits from:
i)	Mr. Stephen Akers, a partner in the London office of Grant Thornton who is assisting the Joint Liquidators in the liquidation;
ii)	Mr. Wide;
iii)	Mr Edward H Davis Jr, a US lawyer acting as co-general counsel for the Joint Liquidators.
The court’s jurisdiction to make the funding order
77.	There was no real dispute that the court had jurisdiction (in the sense of power) to make a funding order in the terms sought by the Joint Liquidators, and that they had the necessary standing to apply for the making of such an order.
78.	Article 8(2) of ERO provides as follows:
“(2)	A restraint order may be made subject to exceptions, and an exception may in particular -
(a)	make provision of reasonable living expenses and reasonable legal expenses in connection with proceedings seeking a restraint order or the registration of an external order;
(b)	make provision for the purpose of enabling any person to carry on any trade, business, profession or occupation;
(c)	be made subject to conditions.”
79.	Despite counsel’s submissions to the contrary, I myself do not consider that Article 8(2)(a) of ERO is relevant in this context, as it clearly refers to “living expenses”, which are inappropriate for a corporate entity.  Arguably, the exception set out in Article (2)(b) is in point, on the grounds that a payment to provide the costs and expenses of SIB’s liquidation is one that enables SIB, by the Joint Liquidators, to carry on the “occupation” of winding up the affairs of SIB, or enables the Joint Liquidators to carry on the “profession” of joint liquidators of SIB.  But it does not matter even if, on the true construction of the sub-paragraph, this were not the case.  The exceptions set out in subparagraphs (2)(a)-(c) are not exhaustive.  A court can clearly subject a restraint order to a provision that does not fall within any of the specific descriptions set out in subparagraphs (2)(a)-(c).
80.	The Court of Appeal clearly considered that there was jurisdiction to make such an order, since not only did paragraph 5 of its order dated 25 February 2010 expressly give SIB leave to apply for an order varying the New Restraint Order to include an exception to it, in accordance with Article 8(2) of ERO, but also paragraph 5 of the New Restraint Order stated that “SIB shall be entitled to its reasonable living and legal expenses” in an amount to be determined by the Crown Court, if not agreed.
The Joint Liquidators’ submissions
81.	Mr. Andrew Bodnar, counsel on behalf of the Joint Liquidators, submitted as follows:
i)	The New Restraint Order, taken together with the Order of the Court of Appeal, expressly envisages that the Joint Liquidators should be entitled to the reasonable costs and expenses of the liquidation from the Restrained Assets.  
ii)	In correspondence the Respondent has accepted, in principle, total funding of $ 20 million.  
iii)	Even if the application were granted and the full facility of $ 20 million were drawn, some $ 90 million or more will remain restrained in this jurisdiction.
iv)	For the reasons set out in the evidence served on behalf of the Joint Liquidators, there was every reason to make a funding order.
v)	The Creditors Committee, representing the interests of the creditors/ victims, has endorsed the proposal whereby $ 20 million of assets restrained in the United Kingdom be made available to the Joint Liquidators to fund the wider activities of the liquidation.  
vi)	The arrangement put forward by the Joint Liquidators, based very closely on the arrangement proposed by the SFO, in correspondence, ensures that the only net cost of securing funding is administration of the arrangement itself.  In contrast, if the Joint Liquidators were forced to have resort to the Sorrell Facility, there would be a net cost to the estate of up to nearly $ 73.8 million.  
vii)	The purposes to which the sums drawn would be applied have been carefully considered, and are being developed in close consultation with the Creditors Committee.  Those purposes are also subject to supervision by the High Court of Antigua.
viii)	The potential wider recovery for the liquidation, if funding were provided, and consequently for the victims of the fraud, would be in excess of $ 1.6 billion.  A US criminal prosecutor could not hope to achieve such a result.
ix)	The criticisms in Mr de Kluiver’s affidavit as to the conduct of the liquidation were unfounded.
x)	There was nothing in the “legislative steer” referred to in the judgment of the Court of Appeal that prevented the making of a funding order in this case.
The SFO’s submissions
82.	As I have already said, it was not easy, given the late service of the SFO’s evidence, and the fact that the SFO’s skeleton argument appeared to address both the Repatriation Application and the Joint Liquidators’ funding application, to discern precisely on what grounds the SFO was opposing the latter.
83.	From Mr. Mitchell’s written submissions, as supplemented by his oral arguments, and from the evidence of Mr. Tehal and Mr. de Kluiver, the SFO’s submissions in opposition to the making of any further funding order appeared to be as follows:
i)	There should be no further provision made from the Restrained Assets for the purposes of funding the ongoing costs and expenses of the liquidation.
ii)	The DOJ “fundamentally disagree[d] with the release of any of” the Restrained Assets, and therefore no funding order should be made;
iii)	There were real concerns as to whether the Joint Liquidators’ proposed Action Plan will be successful.  It was difficult to see how an expenditure of $ 20 million could possibly be justified.  As set out in Mr. de Kluiver’s second affidavit:
a)	Many of the legal actions which the Joint Liquidators contemplate would be duplicative, since they were already being pursued by victim groups or the SEC Receiver.
b)	Most of the litigation contemplated by the Joint Liquidators hinged on the Joint Liquidators being recognised under Chapter 15 bankruptcy proceedings in the United States.  There was little likelihood of the Joint Liquidators being recognised, as, before their removal, the former Joint Liquidators had agreed with the SEC to drop the Chapter 15 proceedings as part of a global settlement.  There was little likelihood that the Joint Liquidators could negotiate a better settlement.
c)	The Swiss advisory fees could have been avoided if the Joint Liquidators had agreed to the repatriation of SIB’s Swiss assets to the United States.
d)	It would be a waste of victims’ money to spend $ 20 million on “Antiguan real estate development and paying for North American lawyers”.
e)	The so-called “Creditors Committee” who had approved the Action Plan were only “a handful of victims”, and therefore not truly representative of the views of the larger constituency.
f)	There was a real concern that sums would be applied in discharge of the former Joint Liquidators’ previous outstanding fees of $ 18 million.  As Mr. Wide’s affidavit indicated, the former Joint Liquidators had achieved minimal recoveries, notwithstanding their incurring such large fees.  There was no real prospect that the current Joint Liquidators would achieve any better results.
g)	By way of contrast, under the confiscation laws of the United States, all of the Restrained Assets in the UK could be returned to “victims”, with the exception of relatively minor administrative fees.
h)	As a matter of US law, the DOJ:
“… would not and could not ask a US court to release criminal proceeds subject to confiscation from a properly entered US restraint order and the funds over to liquidators to invest into speculative real estate ventures, which could take 2 to 5 years to complete … or to fund speculative private litigation, simply because a small proportion of victims are willing to roll the dice.”
Nor, by way of analogy, should the English court.
iv)	Given the constraints of the legislative “steer” contained in Article 46(2)(b) of ERO, as referred to in the judgments of the Court of Appeal in the present case (see, for example, per Arden LJ at paragraph 115, and per Hughes LJ at paragraph 198), it was difficult to see how the court could exercise its discretion so as to agree to the release of so substantial a sum as $ 20 million.
Discussion and reasons the making of the 4 August Order
84.	As Hughes LJ observed, at paragraphs 163-166 and179 of his judgment, the making of a restraint order is an anticipatory, protective order, having many of the characteristics of an interlocutory civil freezing order.  It does not alter rights, it merely freezes the property to which it is applied, pending the determination by the Crown Court of any application under Articles 20 and 21 for an order giving effect to an external order, and its registration, leading ultimately to the transfer of funds or property to the overseas authorities for confiscation.  The power to make a restraint order is also, as Hughes LJ pointed out at paragraph 166 and 198, a discretionary power notwithstanding the constraints of Article 46(2) of ERO.
85.	A court therefore has to approach the exercise of its power to make any variation to an existing restraint order, bearing in mind not only the constraints on the exercise of the power contained in Article 46(2)(a) - (c) of ERO (i.e. that of preserving the existing value of the Restrained Assets, so that they are available to satisfy an existing or future external order), but also the fact that the court is, in effect, preserving the position on a temporary basis, pending what may well be a contested application for the transfer of funds, or other assets to the overseas authority, as between parties claiming competing interests in the assets subject to the restraint order.
86.	In other words, in deciding whether to vary a restraint order, the court has, or may well have, to balance the interests of the overseas authority as against the interests of those claiming interests in the restrained funds:  whether liquidators, creditors, victims of fraud, or otherwise.  That, it seems to me, requires the court to adopt a flexible and pragmatic approach.
87.	In making the 4 August Order, I took into account the evidence filed by both sides, and the various matters raised in argument.  The following factors were those which principally, but not exclusively, informed my decision.
88.	The first factor was that in making the New Restraint Order, the Court of Appeal itself had expressly provided for an exception that SIB was “to be entitled to its reasonable living expenses”.  “[L]iving expenses” was, as I have already said, clearly inappropriate for a corporate entity.  On the basis that the phrase must have meant something, one can only assume that the Court of Appeal’s intention must have been that an exception should indeed be made for expenses of the ongoing liquidation.
89.	However, such an exception would be, prima facie, inconsistent with paragraph 5 of the Court’s order of 25 February 2010, which, as I have already mentioned, provided that the Joint Liquidators were to have liberty to apply for a variation to the New Restraint Order so as to include an exception in respect of the costs and expenses of the liquidation.  But, whatever the Court’s real intention in this respect, it clearly had in mind that provision might well need to be made for the ongoing costs of the liquidation in Antigua.
90.	The second factor which I took into account was that it was not necessarily predicated that this court would, indeed, ultimately make an order for the repatriation of the Restrained Assets to the United States, whether on the Repatriation Application, or on any future applications by the SFO for an order to give effect to and register either the US District Court order dated 14 January 2011, or a future order of the United States courts, pursuant to Articles 20 and 21 of ERO.
91.	In my judgment, partly, but not wholly, for the reasons set out in the dissenting judgment of Arden LJ in the present case (see, in particular, paragraph 137 and the annex to her judgment at pages 95 et seq), it must at least be “reasonably arguable” that the unsecured creditors of SIB, who were victims of the alleged fraud, have an interest in the Restrained Assets for the purposes of Article 46(3)(a) of ERO.
92.	First, it is reasonably arguable that such interest could arise under the statutory scheme for dealing with the assets of a company that is ordered to be wound up:  see Ayerst v C & K (Construction) Ltd [1976] AC 167, as referred to in paragraph (5) of the annex to Arden LJ’s judgment.  That was not a point that was argued before the Court of Appeal, either by the Joint Liquidators or by an unsecured creditor.  Both Sir Andrew Morritt, C and Hughes LJ expressed the “clear provisional view” that unsecured creditors did not hold any relevant interest in the assets of SIB for the purposes of Article 46(3) of ERO:  see paragraph 99 of the judgment of Sir Andrew Morritt, C, and paragraph 178 of the judgment of Hughes LJ.  
93.	As the majority pointed out, there was no need for the Court of Appeal to decide this interesting point, in circumstances where it had not been argued.  It seems to me, however, despite the expressions of “provisional views” by the majority without the benefit of argument, that it is nonetheless appropriate for this court to take into account the reasoned minority view of Arden LJ, to the effect that the point may at least be reasonably arguable.
94.	Second, there is, however, a further basis upon which SIB’s unsecured creditors, who were investor/victims of the alleged fraud (i.e. 99.9% by value of all SIB’s unsecured creditors) (“investor-creditors”) might, at some future date, seek to argue that they had an interest in the Restrained Assets for the purposes of Article 46(3)(a).  That is on the basis that such investor-creditors were induced to deposit funds with SIB because of fraudulent misrepresentations made by SIB, RAS and others as to the nature of SIB’s purported business and audited accounts;  and, as a result, investor-creditors have at all material times had proprietary tracing claims, or proprietary interests as beneficiaries under a resulting or constructive trust.
95.	Snell’s Equity, 32nd Edition (2010) states the position as a matter of English law at paragraph 26-013 as follows:
“(c)	Fraudulently induced transfer.  In the second case, where the claimant is the victim of a fraudulent misrepresentation which induces him to transfer his property to the defendant, the transaction is valid until the claimant elects to rescind it.46  In the meanwhile, the defendant holds his legal interest in the property as beneficial owner, though subject to the claimant’s equity to rescind, a right which is itself proprietary in character.47  On rescission by the claimant, the defendant holds his legal interest in the property on result trusting.48  Since the trust arises only at that stage, the defendant cannot be taken to have owed duties qua trustee before then.49  Nor can any misapplication of money by the defendant be treated as a breach of trust until after rescission.50  The possibility of rescission leading to the imposition of a resulting trust will be barred if the claimant has elected to affirm the transaction.51
46	Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 388-391 per Brennan J;  Lonrho plc v Fayed (No 2) [1992] 1 WLR 1 at 11 per Millett J;  Bristol & West Building Society v Mothew[1998] Ch 1 at 22-23 per Millett LJ.
47	Shalson v Russo [2003] EWHC 1637 (Ch) 281 at [106]-[127].  See para 2-007 above.
48	El Ajou v Dollar Land Holdings Ltd [1993] 3 All ER 717 at 734 per Millett J, reversed on other grounds [1994] 2 All ER 685.
49	Lonrho plc v Fayed …;  Halifax Building Society v Thomas [1996] Ch 217 …
50	Bristol & West Building Society v Mothew ….
51	Halifax Building Society v Thomas …;  Box v Barclays Bank [1998] Lloyds Law Rep Bank, 185;  Daraydan Holdings Ltd v Solland International Ltd [2004] EWHC 622 (CH);  [2005] 4 All ER 73 at [88} per Lawrence Collins J ….”
96.	The point that the investors might have a proprietary claim against the Restrained Assets was not raised in argument before me.  Whether, and the circumstances in which, a victim of a fraudulent misrepresentation has a proprietary claim or interest under a resulting or constructive trust, is not a clear area of English law:  see, for example, paragraph 106 - 127 of Shalson v Russo, cited in the extract from Snell.
97.	It is, of course, now established that English law does not recognise a remedial constructive trust, as opposed to an institutional constructive trust.  As Lord Neuberger, MR said in Sinclair Investments (UK) Ltd v Versailles Trade Finance (in administrative receivership) and Others [2011] EWCA Civ 347, at paragraphs 37 - 39:
“37.	Whether a proprietary interest exists or not is a matter of property law, and is not a matter of discretion: see Foskett v McKeown [2001] 1 AC 102, 109, [2000] 3 All ER 97, [2000] 2 WLR 1299 per Lord Browne-Wilkinson, It follows that the courts of England and Wales do not recognise a remedial constructive trust as opposed to an institutional constructive trust.
38.	Foskett [2001] 1 AC 102, 127–130 also establishes that, where a person has such a proprietary interest, he may enforce it by (a) following the asset unless and until the asset passes into the hands of a bona fide purchaser for value without notice, and also (b) tracing the value of his proprietary interest into identifiable substitutes for the original asset, unless the substitute has been provided by a bona fide purchaser for value without notice.
39.	As Lord Millett explained in Foskett [2001] 1 AC 102, 127, ‘[f]ollowing is the process of following the same asset as it moves from hand to hand’ whereas ‘[t]racing is the process of identifying a new asset as the substitute for the old’. He went on to explain that, at least in principle, ‘[w]here one asset is exchanged for another, a Claimant can elect whether to follow the original ... or to trace the value’. In individual cases, for a variety of different reasons (sometimes practical sometimes principled) one or other course, or, if he is unlucky, both courses, may not be open to a Claimant.”
98.	But there is no doubt that, as a matter of English law, a transaction induced by fraud is voidable, and subject to equitable considerations, may be rescinded.  It would also appear that such a claim may give rise to equitable proprietary claims.  As Etherton J said in London Allied Holdings v Lee & Others [2007] EWHC 2061 (Ch) at 275 and 276:
“275.	The last way in which LAH puts its case on constructive trust proceeds on the footing that the fraudulent misrepresentations of Mr Lee and Mr Dolan made the transfer of the £1 million voidable. LAH is on much more firm and conventional ground with this submission.
276.	There is no doubt that a transaction induced by fraud is voidable and, subject to equitable considerations, may be rescinded. The effect is to restore retrospectively to the Claimant the equitable title to the property, at least to the extent necessary to support an equitable tracing claim: see, eg, El Ajou at p 734d; Shalson at para 120 – 127. In El Ajou at p 734e Millett J described this trust as ‘not some new model remedial constructive trust, but an old-fashioned institutional resulting trust’. Others, however, have preferred to describe it as a constructive trust: Papamichael v National Westminster Bank [2003] EWHC 164 (Comm), [2003] 1 Lloyd's Rep 341; Sarah Worthington ‘The Proprietary Consequences of Rescission’ [2002] 10 RLR 28, 37-38. For present purposes, this difference in nomenclature makes no difference.”
99.	There was nothing before me to suggest that Antiguan law was any different from English law in this respect.
100.	It seemed to me that, in all the circumstances, and despite the fact that the point was not raised before me, I should proceed on the basis that investor-creditors might, at the subsequent hearing of the Repatriation Application (or of any further application, in response to any claim by the DOJ, under Article 20 to give effect to and register an external order), run the argument that they had proprietary interests under such type of resulting or constructive trusts which fell to be recognised under Article 46(3)(a).  It also seemed to me that investor-creditors might do so irrespective of whether, or when, they had purported to rescind their deposit contracts with SIB.  It is not necessary or appropriate for me, on what is an interlocutory application, to consider (let alone determine) any issues of law or fact which might arise in connection with any such claim.  It is a point which, on the basis of the evidence available to me, is, in my judgment, reasonably arguable.  Indeed, Hughes LJ, at paragraph 199 of his judgment in the Court of Appeal in this case, expressly referred to the fact that the Restrained Assets might be “the traceable proceeds of fraud”.
101.	However, even if one has to assume that ultimately, on analysis, such arguments would fail, I would nonetheless make the funding order sought by the Joint Liquidators.  It seems to me that the making of such an order enabling, as it apparently will, some of SIB’s other assets to be realised in the best interests of the investor-creditors, at a time when the Restrained Assets would otherwise by lying fallow, strikes the appropriate balance between the interests of SIB’s investor-creditors and those of the DOJ.
102.	The third principal factor which I took into account in the exercise of my discretion was that the Joint Liquidators were not seeking (as they might have done) the out and out payment and release of the $ 20 million from the Restrained Assets.  As the Joint Liquidators’ evidence demonstrated, they had substantial assets in hand in Antigua with a fire-sale value of $ 45 million.  If the SDC Properties (for the recovery of which the Joint Liquidators appeared to have a good claim) were also included at their net fire-sale value of approximately $ 61 million, the total value of the Antiguan property potentially available for realisation for the benefit of the estate had a fire-sale value of $ 100 million.  Thus, even on a worse-case scenario, the realisable assets likely to be available would be more than sufficient to fund the repayment of the $ 20 million loan and any interest thereon.
103.	It occurred to me when writing this judgment that it is currently not clear from the wording of the 4 August Order (as amended by the 11 October Order) whether the provision for repayment by means of 10% dividend, as set out in paragraph 5(a)(x) of the amended order, merely governed the timing of the repayments of principal and interest, or whether the intention of the provision was to cap the total ultimate sum repayable to the Restrained Assets in respect of the loan (whether in respect of principal or interest) to a figure that was equal to 10% of all net recoveries.  My understanding of the proposal at the time of the hearing (and my intention when making the order) was the former.  In other words, my understanding was that, after all realisations had been made, and prior to the final distribution to SIB creditors by way of dividend, any remaining unpaid balance of the $ 20 million loan together with unpaid interest, would have to be repaid by the Joint Liquidators to the Restrained Assets.  This would not affect the making of interim distributions to the investor-creditors, of course, provided that appropriate provision for repayment of the balance of the loan was made.
104.	I was subsequently informed that my understanding was correct.  However, the point will need to be made clear in the wording of the order.  
105.	The fourth factor was the fact that, on the evidence before me, the Joint Liquidators’ Action Plan appeared to be a realistic and proportionate way forward for the conduct of the liquidation, put forward by responsible professionals, with many years of relevant experience.  It is not for the court to second-guess what appear to be sensible commercial proposals put forward by liquidators for the conduct of a liquidation, supported as they are by a Creditors Committee representing a substantial number (in value terms) of SIB’s investor-creditors.  Moreover, the Joint Liquidators’ conduct of the liquidation will be supervised by the Antiguan court.
106.	Nor did I agree with Mr. de Kluiver’s s pejorative characterisation of the Action Plan.  
107.	As to certain of the adverse comments made by Mr. de Kluiver about the Action Plan:
i)	Mr. Wide’s evidence made it clear that a number of discussions and negotiations had taken place between the Joint Liquidators and the SEC Receiver with a view to agreeing a co-operative approach that enables the Antiguan estate to operate and generate enhanced recoveries, and to put an end to the previous duplication of effort and actions, and to substitute for the previous approach one which was collaborative.  Mr. Wide’s witness statement, dated 2 August 2011, stated, at paragraph 10, as follows:
“… In respect to [the SEC Receiver], we have agreed to provide him with a draft of a ‘memorandum of understanding’ with the overriding objective that the parties should act collaboratively.  This will include determining which of the officers have the best standing and chance of success in the various areas of litigation or recovery;  a common claims adjudication and distribution process;  and a co-operative Chapter 15 process, recognising, and to take advantage of, the differences in standing and scope of the equity receiver and the statutory liquidators.  We have discussed this approach and our discussions with [the SEC Receiver] (under which we agreed to explore these opportunities) with the DoJ and have invited them to participate, particularly in any common claims adjudication and distribution process.  We have every intention, notwithstanding the current position taken by the DoJ, of continuing to work towards an agreed protocol under which the restrained funds will be made available to creditors/victims. We have also agreed to assist in providing documents and information for their criminal prosecution and have responded to the one specific request for accounting detail they have made.  Given our overtures to discuss co-operation, the fact that we have responded to the one specific request for information that they had made, our willingness to continue to provide this co-operative support, and our willingness to continue discussions for a protocol under which the restrained funds will be returned to victims, I am slightly surprised at the hostile and uncooperative stance taken by Mr. de Kluiver in this witness statement.”
Further, paragraph 12.2 of Mr. Wide’s statement stated:
“…  the agreement referred to by Mr. de Kluiver between [the SEC Receiver] and the previous liquidators was never put to the parties’ respective courts for approval and was therefore not ratified and has no effect.  Clearly those discussions did not have regard to the benefits that Chapter 15 recognition can bring, which now forms part of our discussions with [the SEC Receiver] about claims available to both estates.  Just to be clear, there is not intention to negotiate a “better deal” for the SIB estate, but to come up with an appropriate mechanism to maximise realisations (and distributions) for both estates.  …”
I take the view that the sensible, co-operative proposals put forward by the Joint Liquidators should bear fruit, and that there is every chance of duplication being avoided, if an appropriate protocol is agreed.
ii)	So far as the Swiss advisory fees were concerned, Mr. Wide had details of the large amounts that were being charged.  I accept Mr. Wide’s evidence that there is a need for the assets in Switzerland to be actively managed pending the outcome of the Swiss proceedings.  It does not seem to me to be a satisfactory answer for the DOJ simply to contend that such fees could have been avoided if the funds had been remitted to the United States.
iii)	There had never been any suggestion on the part of the Joint Liquidators that any of the $ 20 million would be applied in discharge of the former Joint Liquidators’ fees.  On the contrary, funding was needed so that the Joint Liquidators could oppose payment of any portion of the former Joint Liquidators’ outstanding fees.
108.	The court has to recognise and pay appropriate regard to the needs of the Joint Liquidators, as office holders in a liquidation which the English court has recognised as the foreign main proceeding for the purposes of UNCITRAL, to conduct the liquidation of SIB.  It appeared to me that a funding order providing for a credit line of $ 20 million provided an appropriate and proportionate balance between the reasonable needs of the Joint Liquidators to have access to the funds, in order to maximise recoveries in the liquidation, on the one hand, and the interests of the DOJ on the other to have the Restrained Assets preserved.
109.	The fifth factor which I took into consideration was the fact that, if funding were not provided at a reasonable cost from the Restrained Assets, the estate would have to pay a substantial price (estimated at up to nearly $ 73.8 million) to obtain alternative funding, whether from the Sorrell Facility, or elsewhere.
110.	The sixth point was the fact that the balance of the Restrained Assets needed to be actively managed, whether as cash or investments.  Since the date of the Original Restraint Order, nothing had apparently been done in this respect, by either the former Joint Liquidators or the SFO, whether by appointment of a manger-receiver, or by some sort of agreement as to who should give instructions to the relevant holders of the Restrained Assets.  This was surprising and may well have resulted in the estate losing the benefit of income that might otherwise have accrued during the period.  The 4 August Order provided for the Joint Liquidators to have power in this respect.
111.	The seventh factor which I took into account in exercising my discretion was the evidence relating to the distribution process in the United States if the DOJ ultimately obtained repatriation of the Restrained Assets.  The evidence from Mr. de Kluiver was to the effect that the assets of SIB were properly subject to forfeiture on the grounds that the DOJ could seek confiscation of SIB’s assets on the grounds that SIB was the “corporate alter ego of the human defendants in the case”.  His evidence was also to the effect that the DOJ intends, if the assets were repatriated to the US, to seek to distribute the funds to the worldwide victims of the Stanford fraud.  These were factors which clearly informed the decision of the Court of Appeal to make the New Restraint Order:  see, for example, paragraph 198 in the judgment of Hughes LJ:
“Discretion
198	There are unusual features of this case that (i) there appears to be little risk of the alleged criminals getting their hands on the assets in question, at least unless the allegations prove to be misplaced, but (ii) there are no less than three institutional claimants all seeking to administer those assets. I doubt whether anyone could fail to agree with Jack and Lewison JJ and Judge Kramer QC that it is a matter of considerable regret that the lack of co-operation between them has greatly increased the costs at the eventual expense of the victims of the fraud and perhaps other creditors, but the contest is a fact. Moreover, it is an unusual feature of the US prosecutors' case that the confiscation order which they seek in due course is one which will have as its object the compensation of victims of the fraud. I do not agree that the court's discretion ought to be exercised to refuse a restraint order. The legislative steer points firmly in favour of making such an order and the assurance that if a confiscation order ensues it will be treated as a means of compensation, rather than of mere deprivation, adds strength to the case. The liquidators would not distribute whatever assets they collect in the same way as the US prosecutors. First, ordinary creditors would rank alongside the victims of the alleged fraud. We have no reliable figures for their numbers or nature, but even assuming that there are none who are closely connected with the alleged criminals it is contrary to the steer provided by article 46(2) to treat them the same as the victims. Secondly, although it may well be that most of the victims of the alleged fraud parted with their money to SIB, a significant number (parting, we were told, with over US$1bn) did not, and those who did not could not be the subject of any distribution by the liquidators. Thirdly, the costs of the liquidators are considerable; their own case led them to seek the release from the London assets of over US$1.6m to fund expenses to date, and likely future expenses are said to run at something like US$3m per year. Nor would the costs of any distribution by the US receiver be insubstantial. Although any distribution to victims via an eventual confiscation order would not be without some cost, there is good reason on the material before us to conclude that because there would in effect be a large element of public funding the net sums available for distribution would be much greater if this route is taken.”
112.	However, the evidence before me had a somewhat different emphasis.  First of all, contrary to the Court of Appeal’s understanding, there are very few ordinary creditors of SIB (i.e. creditors who are not victims of the alleged fraud).  As I have already said, it now appears that at least 99.9% by value of SIB’s creditors are investor- creditors.
113.	Second, although, from the perspective of those victims of RAS’s alleged fraud who were not creditors of SIB (and I had no evidence before me of the value of their claims, other than the $ 1 billion figure to which the Court of Appeal referred), there would be an obvious advantage in having the proceeds of RAS’s alleged fraud distributed pari passu amongst all victims, irrespective of whether a particular victim had a proprietary or creditor claim against SIB.  Such a proposal for distribution would clearly be contrary to the interests of SIB’s investor-creditors, might be contrary to their rights under Antiguan insolvency law to have SIB’s estate administered exclusively for SIB’s creditors, and would be a point which SIB’s creditors might well wish to argue.  Thus, I do not consider it appropriate to thwart what appears to be the legitimate wishes of SIB’s Creditors Committee to support the Action Plan, when, at this stage, there can be no certainty that the funds will eventually be repatriated or distributed to a wider constituency.  Moreover, even if they were ultimately to be transferred to the DOJ, they should not be substantially diminished by an order for the provision of $ 20 million funding by way of loan from the Restrained Assets.
114.	Third, the evidence of Mr Edward H Davis, sworn on behalf of the Joint Liquidators, stated that the US District Court’s order of 14 January was provisional, and that there would be no adjudication unless and until RAS were convicted.  Since RAS was maintaining that he was mentally unfit to plead, such a conviction and any forfeiture and distribution of the Restrained Assets to victims might be many years down the track.  Conversely, there would be no restriction on the Joint Liquidators making interim distributions to SIB’s creditors as and when funds became available.  Moreover, the United States Treasury Department, in its dealings with victims of the fraud, had not accepted the analysis and basis of SIB being the corporate alter ego of RAS and the other defendants in the criminal case.  Mr. Davis also referred to the cumbersome nature of the DOJ’s distribution process, which, apart from taking years to complete, could result in a “… complex and expensive claims adjudication and distribution process”.
115.	The differences between the two descriptions of the DOJ’s adjudication and distribution process was not something which needed to be resolved on this application.  But the evidence before me suggested that it may not necessarily be the case (as the evidence before the Court of Appeal appeared to show), that the net sums available for the distribution to SIB’s investor-creditors would necessarily be greater if the funds were repatriated pursuant to an eventual confiscation order.
116.	For all the above reasons, and given, in addition, that a balance of some $ 80 - 90 million would be left as Restrained Assets, even if the funding order were made, I took the view that an order for $ 20 million to fund the ongoing liquidation, subject to the undertakings, constraints and notification requirements imposed on the Joint Liquidators by the terms of the order, was a reasonable and proportionate order, adequately balancing, on an interim basis, the potential competing interests of SIB’s investor/creditors and other victims of SIB’s fraud.

Schedule 1