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Primeo Fund (in Official Liquidation) v Bank of Bermuda (Cayman) Ltd and another (Cayman Islands)

[2023] UKPC 40
A fund lost money in Madoff's scam and sued its bankers. The court decided the fund could sue the bankers, but the bankers weren't fully responsible because the fund also made bad decisions. The fund got some of its money back, but not all of it.

Key Facts

  • Primeo Fund (in Official Liquidation) brought claims against its former professional service providers (respondents) for breach of duties related to Bernard Madoff's Ponzi scheme.
  • Respondents included Bank of Bermuda (Cayman) Ltd (administrator) and HSBC (custodian).
  • Primeo invested directly and indirectly with Madoff.
  • Primeo's claims included breaches of contract, negligence, and strict liability.
  • The case involved numerous legal issues, including limitation and contributory negligence.

Legal Principles

Reflective Loss Rule

Common Law

Contributory Negligence

Cayman Torts (Reform) Act 1996 Revision, Section 8(1); UK Law Reform (Contributory Negligence) Act 1945, Section 1(1)

Limitation of Actions

Cayman Limitation Act 1996 Revision, Section 37

Agency Law

Common Law

Causation (Loss of a Chance)

Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602

Construction of Contracts

Common Law

Concurrent Liability in Contract and Tort

Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852

Outcomes

Primeo's appeal on reflective loss allowed.

Primeo suffered separate losses from direct investments before the Herald Transfer.

Contributory negligence applies to Bank of Bermuda's liability, but not HSBC's.

Bank of Bermuda's liability was based on a duty of care concurrent with a tortious duty. HSBC's duty was specific and not co-extensive with a tortious duty.

Reckless breaches of contract are insufficient to postpone limitation under Section 37(2).

Deliberate in Section 37(2) requires knowledge, not recklessness.

BLMIS was HSBC's agent for limitation purposes.

BLMIS acted on HSBC's behalf to fulfil HSBC's custodial duties. BLMIS's deliberate concealment is attributable to HSBC under Section 37(1)(b).

Primeo's loss of chance argument on causation rejected.

Raising this argument on appeal contravenes the principle of finality in litigation.

Contributory negligence reduction against Bank of Bermuda set at 50%.

The Court of Appeal found the 75% reduction by the trial judge was outside the reasonable range of outcomes.

Appeal allowed in part.

Primeo succeeded on reflective loss and HSBC's contributory negligence defense; other grounds of appeal were rejected.

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