The Ontario Superior Court of Justice has ordered almost $2 million in security for costs be posted by several former feeder funds for notorious Ponzi schemer Bernie Madoff, against PriceWaterhouseCoopers LLP (PwC), the funds’ former auditors.
The plaintiffs in the case include the liquidator for several funds that acted as feeder funds for several billion dollars worth of investments with Bernard L. Madoff Investment Securities — Fairfield Sentry Ltd., Fairfield Sigma Ltd., Fairfield Lambda Ltd. — and the funds themselves.
According to the court’s decision, the defendant, PwC, sought security for costs in a case that involves a $5 billion claim for auditor’s negligence arising from PwC’s audits of the funds in 2006 and 2007. Those allegations have not been proven.
The decision notes that security for costs can be ordered in cases where there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs. The plaintiffs did not object to request for security for costs, the issue for the court was the appropriate amount.
Ultimately, the court decided that almost $2 million is required for the initial stages of litigation in the case, which is expected to be complex and protracted. The order aims to cover costs only through the initial stage of the examinations for discovery, the decision says.
The court ordered that security for more than $1.3 million in legal fees and more than $500,000 in disbursements be posted within 60 days by the plaintiffs.
“I recognize that this award for security for costs may represent a high water mark in terms of the amount ordered,” noted Judge Newbould in the decision. “However, each case must be dealt with taking into account the circumstances of the particular case. It can be expected that the case will rank well up in terms of complexity. That is clear from the pleadings, and the known circumstances of the Madoff Ponzi scheme. The size of the claim against PwC means that its livelihood is at stake.”