High Court Decision Highlights Need To Understand Blameworthiness Of All Wrongdoers Before Settling

Author:Ms Sharon Daly and Claire McLoughlin
Profession:Matheson
 
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Summary

On 4 December 2018 the High Court gave judgment on a preliminary issue in favour of the Defendant, HSBC Institutional Trust Services DAC ("HTIE") in a claim for $141 million taken against it by Defender Limited ("Defender"). The issue concerned the impact of the Civil Liability Act 1961 (the "Act") where a plaintiff settles its claim against one wrongdoer first.

Background

The case involved Defender, a fund which invested into Bernard L Madoff Investment Securities LLC ("Madoff"), and concerned a number of allegations against HTIE, the fund's custodian.1 Madoff is now known to have operated the world's largest Ponzi scheme, defrauding his customers of billions of dollars. Upon discovery of the fraud, the US Securities Investor Protection Corporation appointed Irving Picard as trustee to manage the liquidation of Madoff (the "SIPC Trustee"). He was tasked with recovering the stolen assets and paying compensation to Madoff customers. Defender was a customer of Madoff and it made a claim in the US Bankruptcy. In March 2015 Defender entered a Settlement Agreement with the SIPC Trustee (the "Settlement Agreement") which included a wide release of all tort claims against the SIPC Trustee and Madoff.

Post this settlement, one of the defences put forward by HTIE related to the Act, and the question before Mr Justice Twomey was whether, by virtue of the terms of the Act, the effect of the Settlement Agreement was to identify Defender with Madoff, and thereby with his wrongdoings, such that Defender's claim against HTIE should be reduced to zero. While the trial was scheduled for 20 weeks, Mr Justice Twomey invited HTIE to have its defence under the Act heard as a preliminary issue after the conclusion of opening submissions, as it would be dispositive of the proceedings if HTIE was successful.

The hearing of the preliminary issue involved the Defendant proceeding on the assumption that the Plaintiff's allegations against it were proven in the Plaintiff's favour. HTIE agreed that it could fully defend the claim despite this unfavourable and artificial requirement, but would not be bound by any such admission if this defence under the Act was unsuccessful, in which case the trial would resume and evidence would be delivered.

Civil Liability Act defence put forward by HTIE

For the purpose of the preliminary issue only, HTIE admitted it was a concurrent wrongdoer with Madoff under the Act. HTIE argued that the Settlement Agreement constituted a...

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