The long road: Privy Council delivers final judgment in Primeo (in Liquidation) v Bank of Bermuda & HSBC
The Judicial Committee of the Privy Council (the Board) has unanimously adjudicated on the remaining issues in the appeal from Cayman’s Court of Appeal, following its earlier preliminary judgment on reflective loss, which you can read about here.
The dispute arises from the infamous ponzi scheme perpetrated by Bernard Madoff. The Appellant, Primeo Fund (in Liquidation) (Primeo), was a fund that made investments in the fraudulently run company, BLMIS. The Respondents were the Bank of Bermuda as the administrator of the Primeo funds, and HSBC as custodian of the assets respectively.
In its most recent determination, the Board considered the following three issues:
- Liability and damages
- HSBC was responsible for loss suffered each time that Primeo invested in BLMIS.
- However, the real loss suffered was nil because certain repayments exceeded the investments.
- New claims and defences made by the parties on appeal were rejected in accordance with the principle of finality in litigation , , -, , and .
- Statutory limitation of claims
- Cayman statute extends the ordinary limitation period where there has been a “deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time”.
- Recklessness is distinct from a “deliberate” commission. On this basis, some of Primeo’s claims were time-barred.
- Contributory negligence
- The defence of contributory negligence is in principle available where a claim is based on the breach of a contractual duty of care which is concurrent with a duty in tort.
- On the facts, it was not a defence available to HSBC because (i) its duty was not one of reasonable care; and (ii) there was no concurrent duty in tort.
- The defence was available to the Bank of Bermuda.
In summary, the Board allowed part of Primeo’s appeal, and part of the Respondents’ cross-appeal. This milestone decision marks the end of many years of litigation for Primeo in what was at the time the world’s largest known ponzi scheme. Practitioners will continue to lean on the Board’s judgments on contractual law and the appeal process in Cayman and other offshore jurisdictions.