Thema International Fund Plc v HSBC Institutional Trust Services [Ireland] Ltd and Another

• Jurisdiction: Ireland
• Judge: Mr Justice Charleton
• Judgment Date: 20 February 2013
• Neutral Citation: [2013] IEHC 76
• Court: High Court
• Docket Number: Record Number: 10983 P/2008
• Date: 20 February 2013

Thema International Fund Plc v HSBC Institutional Trust Services (Irl) Ltd

Commercial

Between

Thema International Fund PLC

plaintiff

and

HSBC Institutional Trust Services (Ireland) Limited

defendant

and

Thema Asset Management Limited and 20:20 Medici AG

third parties

[2013] IEHC 76

Record Number: 10983 P/2008

The High Court

Practice & procedure – Pleadings – Amendment – Application to amend statement by plaintiff

Facts: Substantive proceedings were underway in relation to the fraud carried out by Bernie Madoff. The plaintiff claimed a large sum in losses in relation to that fraud, and now sought permission to amend the statement of claim. A number of amendments were agreed, save one.

Held by Charleton J, that the discretion to permit amendments should not be exercised where the necessity for the amendment was not clear. This was equally true where amendments sought raised allegations not backed by evidence and not likely to be supported by evidence in the future. In the current case, the Court was satisfied the pleadings already were a proper reflection of the case to be made by the plaintiff, and the application would therefore be refused.

RSC O.28 r1

EUROPEAN COMMUNITIES (UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES) REGS 2003 SI 211/2003

CROKE v WATERFORD CRYSTAL LTD & IRISH PENSIONS TRUST LTD 2005 2 IR 383 2005 1 ILRM 321 2004/11/2418 2004 IESC 97

O'LEARY v MIN FOR TRANSPORT & ORS 2001 1 ILRM 132 2000/14/5482

RSC O.19 r28

CORNHILL & ORS v MIN FOR AGRICULTURE UNREP O'SULLIVAN 13.3.1998 1998/14/4976

MIN FOR JUSTICE v VOZNUKA UNREP PEART 23.4.2009 2009/40/9851 2009 IEHC 195

FOSS v HARBOTTLE 67 ER 189 1843 2 HARE 461

AFORGE FINANCE SAS & AFORGE GESTION SAS v HSBC INSTITUTIONAL TRUST SERVICES (IRL) LTD & ORS UNREP CLARKE 10.1.2011 2011/2/446 2011 IEHC 6

1 Mr Justice Charleton delivered on the 20th day of February 2013

2 1. This judgment is part of the preparation for the Bernie Madoff fraud litigation. The main hearing is listed for trial on 23 April 2013. The plaintiff claims the loss of about $1 billion. The case was carefully managed over two years and made ready for trial by Clarke J and regard is had to his preliminary judgments in most of these applications.

3 2. Pursuant to a motion on notice, dated 12 February 2013, the plaintiff Thema International Fund PLC seeks:

4 An order pursuant to Order 28 Rule 1 of the Rules of the Superior Courts permitting the plaintiff to amend its statement of claim and reply.

5 3. That rule reads:

6 The Court may, at any stage of the proceedings, allow either party to alter or amend his indorsement or pleadings in such manner and on such terms as may be just and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties.

Current pleadings

7 4. The statement of claim as it now exists alleges that the plaintiff had a business relationship with the defendant since 1996 on the basis of the Undertakings for Collective Investment and Transferable Securities Regulations 2003, SI 211 of 2003. Of this relationship it is also alleged that it is founded on a private document called the custody agreement (supplemented in 2006); that the relationship was also governed by notices issued by the Financial Regulator; that liability also exists in contract, tort and for breach of fiduciary duties; that the appointment of Bernie Madoff as subcustodian constituted a breach of duty/contract; and that an account should be ordered in equity. Reading the statement of claim, it is plain that the plaintiff is a corporate entity and that the loss that it suffered arises from disappointment in respect of fees but it is equally obvious that any such loss is a small part of its claim. In particular, whatever the sums that were actually invested, losses are stated at paragraph 25 as being the combination of $ 498 million and €483 million; sums proposed as the value of the investment made by the plaintiff in the defendant on the basis of the last notice from the defendant in its role as custodian on 28 November 2008. It is pointless to attempt to unravel the detail of this. That is a matter for the trial. As to the current defence, it responds that the Statute of Limitations applies as the damage claimed occurred before December 2002; that there was otherwise no negligence or other breach of duty; that Thema as plaintiffs are guilty of contributory negligence, including by involvement in the appointment of Madoff; in this regard it offers some initial particulars. The defence joins Thema Asset Management Ltd as a third party as being responsible both in contract and tort and everything else and joins 20:20 Medici AG as, similarly, being responsible in tort for appointment of Madoff.

8 5. Nothing could be clearer from this litigation than that everybody is blaming everyone else for the choice of Madoff and for not finding out about Madoff and for being complacent about Madoff. About all of this, I have no view at all as I have heard no evidence.

9 6. Another thing that could not be less obscure is that in suing the defendant, the plaintiff Thema is claiming back not only the entire of whatever monies they expended in vain because of the Madoff fraud, which would be tens of millions of dollars or euros for lost work or whatever, but that the substantial bulk of their claim is to recover the investment that they put into the defendant as custodian, sums of hundreds of millions in those currencies. From the statement of claim, it is clear that investors, and I am told there may be about 250 of them and they are called unit-holders, put their money into the plaintiff Thema, probably as a result of a prospectus, and that this is the money that is sought to be...