Privy Council Clarifies Contractual Duties and Limitation Periods in Primeo Fund Case

Citation: [2023] UKPC 40
Judgment on


The case of Primeo Fund (in Official Liquidation) v Bank of Bermuda (Cayman) Ltd and another represents a complex and multifaceted litigation arising from the notorious Ponzi scheme orchestrated by Bernard Madoff. This appeal to the Judicial Committee of the Privy Council addressed several legal issues, dissecting the interplay between contract law, tort law, the principle of finality in litigation, contributory negligence, and statutory limitation periods. The nuanced assessment of these matters by the UK’s highest appellate court provides significant legal insight for practitioners within the UK jurisdiction.

Key Facts

Primeo Fund contracted the services of professional administrators and custodians, namely Bank of Bermuda and HSBC, respectively. It later became apparent that the investments managed by Bernard L Madoff Investment Securities LLC (BLMIS) were part of a Ponzi scheme. Primeo, in official liquidation, sought to recover losses from the aforementioned service providers, asserting breach of contract due to failure to fulfill custodial and administrative duties, and negligence. Issues arose regarding the mitigation and measurement of losses, the grounds for contributory negligence as a defense, and the application of limitation under Section 37 of the Cayman Limitation Act.

Contractual Obligations and Concurrent Liability

The legal framework surrounding Clause 16(B) of the Custodian Agreement indicated that HSBC held custodial obligations binding it to a specific duty – namely ensuring effective protection of Primeo’s assets by implementing safeguards and making appropriate recommendations. It was not HSBC’s role to perform professional custodial services themselves but to ensure that BLMIS, as a sub-custodian, met specific standards.

Statute of Limitations

The courts examined the application of Section 37 of the Limitation Act concerning the timeliness of the claims. It was determined that BLMIS, acting as a sub-custodian, was HSBC’s “agent” under the Act, thus postponing the commencement of the limitation period due to BLMIS’s fraudulent concealment of relevant facts.

Contributory Negligence

The concept of contributory negligence featured prominently in this case. A distinction emerged between claims against the Bank of Bermuda for gross negligence in calculating the NAV and against HSBC pertaining to its custodial role. The courts underscored that contributory negligence, as per the Torts (Reform) Law, applies to damage suffered partly due to a claimant’s own fault. However, the Privy Council found that contributory negligence was not applicable to HSBC’s claim as it stemmed from a breach of a particular custodial duty rather than a general obligation to exercise reasonable care.


The Judicial Committee of the Privy Council provided clarity on the applicability of contributory negligence to contractual claims, endorsing the position that such defense is permissible in cases where there is concurrent liability in both contract and tort. It was concluded that HSBC’s relationship with Primeo did not warrant an application of contributory negligence as a defense, which is a departure from the Court of Appeal’s finding. With regard to limitation, the Privy Council endorsed the view that BLMIS’s actions as a sub-custodian could be imputed to HSBC, affecting the limitation period due to deliberate concealment of fraud.


The decision elucidated vital principles applicable in UK law, particularly recognizing the nuanced application of contributory negligence in contractual contexts with concurrent tortious duties and addressing the statutory construction of “agent” under limitation law. This case reinforces the importance of precise terms within service contracts and highlights the courts’ role in interpreting such obligations, especially when external wrongdoing influences the outcome. Significantly, the ruling demonstrates the necessity for UK legal professionals to pay heed to the convergence of different legal duties and their consequences, both in drafting contracts and in litigation.

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