A court ruling in Bermuda has paved the way for representatives of victims of the massive Bernard Madoff fraud to proceed with a civil battle to try to recover as much as $300 million in management fees collected by a company based here.Kingate Management Ltd, run out of a small three-person office on Front Street, Hamilton, purportedly fed $1.7 billion to Madoff’s New York firm, racking up the hundreds of millions of dollars in fees over more than a decade as huge sums of European and other investors’ money passed through Bermuda on the way to New York.London-based Federico Ceretti and Carlo Grosso set up Kingate Management on the Island in 1994 to manage the two Kingate funds, now in liquidation.Chief Justice Ian Kawaley in his ruling granted leave to sue a company in liquidation —- a major victory for the Bermuda liquidators of the Kingate funds.Two sets of claims are being made by the Kingate funds against Kingate Management —- unjust enrichment claims and contractual/tort claims.In his ruling Mr Kawaley noted the value of each fund was calculated on the value of assets believed to have been held by the Madoff firm “but which in fact did not exist”.He wrote: “The (two) Funds seek to recover under various claims what now seem in cumulative terms to be generous management fees which were paid to the Company (Kingate Management) and distributed to its shareholders before the business structure collapsed as a result of the implosion at BLMIS (Bernard L Madoff Investment Securities) consequent upon Bernard Madoff’s arrest.”He continued: “The underlying commercial background to the Funds’ claims valued by them at in excess of $300 million is that the Company has virtually no liquid assets and the Defendants are seeking to retain substantial distributions received at a time when the Company was flush with money.“Although two of the Trust Defendants claim to be creditors in the amount of some $900,000, this pales into insignificance when one considers that their legal entitlement to retain the far larger distributions they allegedly received (in excess of $300 million) is in question in the Civil Action.”The Trust Defendants include First Peninsula Trustees Ltd, Port of Hercules Trustees Ltd, Ashby Holding Services Ltd, El Prela Group Holdings Services Ltd, Ashby Investment Services Ltd, El Prela Trading Investments Ltd, and Alpine Trustees Ltd.In another separate action involving the Madoff fraud, court documents state millions of dollars were transferred from Kingate Management into a string of trusts, and Mr Ceretti was a beneficiary of some including, El Prela, Port of Hercules and Alpine.Mr Kawaley wrote: “While it is also obvious that the Funds’ investor creditors are the ultimate victims of the Madoff fraud, there is no suggestion that the Trust Defendants were themselves implicated in the fraud. These Defendants’ desire to vigorously defend their right to retain what they view as a legitimate return on their own investment in the structure that provided international investors with access to a highly popular product is entirely understandable - and could ultimately be vindicated.“Who should bear the risk of the losses sustained by the Funds in the present scenario (and similar scenarios elsewhere in the Madoff-infected commercial world) remains to be decided.”He said the main question raised is whether the claims asserted against Kingate Management ought to be continued in the civil action or advanced instead through the proof of debt process in the company’s liquidation.Sedgwick Chudleigh argued to lift the stay in order to be able to sue a company in liquidation.In ruling that the stay should be lifted, Mr Kawaley found that Kingate Management “has no or no significant liquid assets but does have insurance cover which, depending on information the Official Receiver has yet to disclose to the Funds, will possibly fund at least some defence costs and will potentially meet at least some of the liability to which the Company is exposed in relation to the Funds’ claims. The policy on its face appears only to cover the fault-based claims.”In Bermuda, Alex Potts of Sedgwick Chudleigh represented the Joint Liquidators of Kingate Global Fund and Kingate Euro Fund Ltd, and the plaintiffs in the civil action.Saul Froomkin QC of Isis Law and Venous Memari of Liberty Law Chambers represented the Official Receiver and Provisional Liquidator of Kingate Management and Tim Marshall and Katie Tornari of Marshall Diel & Myers Ltd acted for the Trust defendants including First Peninsula Trustees, Port of Hercules Trustees, Ashby Holding Services and the other Trust Defendants.Bernard Madoff, 74, is serving a 150-year prison sentence after pleading guilty in 2009 in the largest investment fraud in US history.