Mad­off Ponzi loss case cleared for hear­ing

The Irish Times - - Business News - MARY CAROLAN

The Supreme Court has cleared the way for a full hear­ing of a claim con­cern­ing mul­ti­mil­lion losses re­lated to the Ponzi scheme run by jailed US fraud­ster Bernie Mad­off.

De­fender Ltd, a Bri­tish Vir­gin Is­lands (BVI) reg­is­tered in­vest­ment fund, had sued HSBC In­sti­tu­tional Trust Ser­vices (Ire­land) Ltd, of Grand Canal Sq, Dublin for ¤141 mil­lion, but the case will pro­ceed against HSBC France on foot of a con­sent or­der made last May.

De­fender ap­pealed to the Supreme Court after a late 2018 High Court rul­ing on a pre­lim­i­nary is­sue cast doubt on the case pro­ceed­ing in full.

In the main judg­ment of the five-judge Supreme Court yes­ter­day, Mr Jus­tice Donal O’Don­nell al­lowed the ap­peal.

De­fender al­leges neg­li­gence and breach of con­tract re­gard­ing the HSBC com­pany’s al­leged role as a cus­to­dian of funds lost as a re­sult of fraud by its al­leged sub-cus­to­dian Bernie L Mad­off Se­cu­ri­ties LLC. That com­pany was op­er­ated by Mad­off, who was in­volved in a ¤65 bil­lion Ponzi scheme in the US.

Mr Jus­tice Michael Twomey, in the High Court, said that the is­sue arose be­cause De­fender set­tled its claim for the re­turn of $540 mil­lion with Mad­off’s com­pany for at least 75 per cent of that sum. It is su­ing the HSBC sub­sidiary as an al­leged con­cur­rent wrong­doer, with Mad­off, for the balance of its loss.For the pur­poses of the pre­lim­i­nary rul­ing only, he found Mad­off and the HSBC busi­ness to be “con­cur­rent wrong­do­ers” in re­la­tion to the loss caused to De­fender. And he up­held ar­gu­ments by the HSBC trust ser­vices unit that, be­cause De­fender has set­tled its claim against Mad­off, De­fender can­not pur­sue the other wrong­doer.

Mr Jus­tice O’Don­nell said, while the High Court was cor­rect in its con­struc­tion of sec­tion 17, it had wrongly con­cluded the only pos­si­ble out­come of the ap­pli­ca­tion of sec­tions 17 and 35(1)(h) of the Civil Li­a­bil­ity Act was ap­por­tion­ment of 100 per cent li­a­bil­ity against De­fender.

Nei­ther sec­tion 16 nor 21 of the Act pro­vide a ba­sis for dis­miss­ing the dam­ages claim from the start, he also found. On those and other grounds, the ap­peal was al­lowed.

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