Defender Ltd v HSBC France (1), Defender Ltd v HSBC France (2)

• Jurisdiction: Ireland
• Judge: Mr Justice Charleton
• Judgment Date: 03 July 2020
• Neutral Citation: [2020] IESC 37
• Date: 03 July 2020
• Docket Number: Supreme Court appeal number: S:AP:IE:2019:000027 Court of Appeal record number 2019/219 [2019] IECA 53 High Court record number 2019/000 [2019] IEHC 000 S:AP:IE:2019:000027,[S.C. No. 27 of 2019]
• Court: Supreme Court

BETWEEN

DEFENDER LIMITED

PLAINTIFF/APPELLANT

AND

HSBC FRANCE (FORMERLY HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LIMITED)

DEFENDANT

AND

RELIANCE MANAGEMENT (BVI) LIMITED, RELIANCE INTERNATIONAL RESEARCH LLC, FINEMAN LIMITED

AND

DAVID WHITEHEAD

THIRD PARTIES

[2020] IESC 37

O'Donnell J.

Dunne J.

Charleton J.

O'Malley J.

Baker J.

Supreme Court appeal number: S:AP:IE:2019:000027

[2020] IESC 000

Court of Appeal record number 2019/219

[2019] IECA 53

High Court record number 2019/000

[2019] IEHC 000

S:AP:IE:2019:000027

AN CHÚIRT UACHTARACH

THE SUPREME COURT

Damages – Liability – Statutory interpretation – Appellant appealing from the High Court judgment holding that the respondent was entitled to succeed on its plea under s. 17(2) of the Civil Liability Act 1961 – Whether the High Court was correct in its construction of s. 17 of the Civil Liability Act 1961

Facts: The appellant, Defender Ltd (Defender), in November, 2013, commenced proceedings against the respondent, HSBC Institutional Trust Services (Ireland) Limited (HSBCITS), contending that it was negligent in failing to identify that the structure of Bernard L. Madoff Investment Securities LLC (BLMIS) facilitated fraud and also that, as custodian, HSBCITS was vicariously liable for the wrongful acts of the sub-custodian. On 30th October, 2018, the trial commenced. At that point, the claim was for US$141m, being the balance which Defender contended was due to it by BLMIS, and which it had not and was not likely to receive, although Defender agreed it would give credit to HSBCITS for any further monies received in the bankruptcy. The trial judge raised the possibility that some of the issues, particularly those relating to ss. 16 and 17(2) of the Civil Liability Act 1961 (the CLA), which had been raised by way of defence by HSBCITS, might, if decided, be capable of determining the proceedings. On 4th December, 2018, the judge delivered a judgment holding that HSBCITS was entitled to succeed on its plea under s. 17(2). Moreover, it provided a full defence to the damages claim made by Defender. The trial was adjourned to permit an appeal of that decision. Defender also intimated an intention to, in the event that the interpretation adopted by the trial judge was upheld, challenge the constitutionality of s. 17(2). Defender also brought a motion that the trial judge recuse himself from a further hearing. The trial judge adjourned that motion generally, pending the outcome of the appeal, as it was not apparent to him that there would be a full hearing, or that he would be assigned to hear it. That decision was upheld on appeal. HSBCITS was awarded the costs of the preliminary hearing, but not of the proceedings. Defender maintained, and the High Court judge agreed, that the outcome of the preliminary issue disposed of the damages issue, but did not determine the entire proceedings since Defender maintained that they claimed for a declaration and a claim for restitution. HSBCITS cross-appealed in respect of that determination, contending that the outcome of the proceedings determined the case, and that the Court ought accordingly to have dismissed the proceedings and awarded HSBCITS the costs of the proceedings.

Held by the Supreme Court (O’Donnell J) that while the High Court was, at least as a matter of orthodox statutory interpretation, correct in its construction of s. 17 of the CLA, it was, nevertheless, wrong to conclude that the only possible outcome of the application of ss. 17 and 35(1)(h) of the Act was an apportionment of liability of 100% against Defender. O’Donnell J also concluded that neither s. 16 nor s. 21 had, properly construed, provided a basis for dismissing the damages claim in limine. Accordingly, O’Donnell J held that the order of the High Court must be set aside.

O’Donnell J held that would allow Defender’s appeal against the order of the High Court.

Appeal allowed.

Judgment of Mr Justice Charleton , delivered on the 3rd of July 2020

1 In concurring with the judgment of O'Donnell J on the outcome of this appeal, since there will now be a full trial, rather than a preliminary issue, some further comment may be appropriate on the management of that trial.

Crime and tort

2 What the trial judge concerned himself with was the issue of whether a settlement of liability with the trustee in bankruptcy of the Bernie Madoff financial entities in New York, consequent upon his gigantic and decades-long fraud, meant that the plaintiff was to be identified with a co-tortfeasor defendant so completely as to relieve all other defendants of all possibility of any finding of liability. In so deciding, the trial judge was attracted to the notion that a crime always trumps a tort: that since Bernie Madoff had erected a voracious but superficially attractive Ponzi scheme, deceiving new investors on the basis of false past returns funded by the continual agglomeration of new money, his liability was to be assumed by the plaintiff and as what he had done was a series of crimes, that those offences outstripped even the grossest negligence, should there be any negligence at all, of any of the defendants. That approach was wrong. Crime does not remove or somehow trump tortious liability. What the Civil Liability Act 1961 is about is sharing and finding equitable apportionment for fault where more than one person has contributed to the wrong suffered by the plaintiff or where a plaintiff has contributed to the occurrence of that wrong.

3 Assault is a crime and a tort, as is false imprisonment, as are various forms of trespass to property and detinue. Fraud describes various tortious wrongs and also crimes prohibited under the Theft and Fraud Offences Act 2001. If a relative is killed, where the intention of the killer was to cause death or serious injury that is murder but even a conviction does not preclude recovery of compensation for grief and for the loss of the financial support of that person which is recoverable under Part IV of the 1961 Act. Moreover, even in homicide there may be contributors to the ultimate tortious wrong, that a dependant of the victim is deprived of support and is bereaved. A person supplying a knife to an assailant may be reckless that death or serious injury results, but the killer may intend that. Hence, there are two wrongdoers, one guilty of manslaughter and one of homicide. What about gross negligence manslaughter? This is a crime and it is also a particularly clear form of the tort of negligence. If a car is badly repaired and crashes, the contribution of the garage to the wrong may be so serious that if someone is killed that liability for manslaughter is involved but so too there may be fault in the driver that can be part of the overall wrong or be, in terms of driving, so overwhelmingly bad as to displace that liability in crime. Or it can be in tort that both driver and garage share liability. Crime has nothing to do with one form of wrong being more important than another from the point of view of civil liability and degrees of fault. The 1961 Act, as the separate judgment of O'Donnell J demonstrates, is concerned with contribution to an overall wrong to a plaintiff, should any such wrong be proven, and not in classifying wrongs in a cascade from murder to manslaughter to gross negligence to negligence to breach of statutory duty to breach of contract.

4 What is involved here is neither obscure nor unusual. A person receives another's money. That person is to care for it and foster growth through investment, possibly to enable the investor to one day retire. Another person, because of the temptations associated with money, and the flaws in human nature, is appointed to watch how that person deals with the money. If the money disappears, the argument for Defender is that if the keeper of the funds dissipated or stole the money, then if the watcher did not detect it by doing the job assigned, the watcher as well as the fraudster may both be liable. O'Donnell J's judgment recites the settlement with the trustee in bankruptcy of the Madoff entities, the keeper, to the tune of 75% of what was lost and that it is possible to recover up to 25% of the total should negligence be found against the watcher of the investor of the money. Where the share of contribution to any wrong is larger, because of existing compensation nothing more than 25% may be recovered, but if the contribution to the wrong by the watcher is less than that, say 5% for example, then there may be an issue of constitutional construction or unconstitutionality in relation to the legislation.

Managing the case

5 In the neighbouring kingdom, case management came in consequence of the reforms introduced by Lord Woolf and have been the subject of continual refinement since then. These developments are set out in the judgment of Denham CJ in Talbot v Hermitage Golf Club [2014] IESC 57. Emphasised in that judgment, concurring in the remarks also made by Charleton J, is that the courts have limited resources and that such internationally declared obligations as the entitlement of litigants to have a trial heard within a reasonable timeframe mean that no litigant is entitled to demand any undue portion of a public court system. That system exists for the benefit of all litigants. Simply because a great deal of money may be involved, or the issues are complex or are presented as complicated, does not automatically mean that the parties are entitled to: multiple prehearing motions; or can place an undue burden of discovery one on the other; or have a right to call multiple contending experts on the same issue; or to open a case over days; or be granted days or weeks to cross-examine witnesses, traversing in the process linked chains of acres of emails or documents; or, in short, to have as much time as they feel they want that can become an indulgence of obsession blurred by poor focus.

6 Over...