Concurrent Wrongdoers And The Civil Liability Act – Defender v HSBC

Summary

A recent High Court judgement delivered by Mr Justice Michael Twomey analysed the link between blameworthiness and causation in ascertaining the impact of the Civil Liability Act 1961 (the "CLA") on concurrent wrongdoers where a settlement has been made with one wrongdoer.

The case highlights the dangers that may arise where a settlement agreement is entered into with one of a number of parties that contributed to the same loss. The High Court, having reviewed a number of decisions from other jurisdictions, found, based on the facts of this case, where there are civil and criminal wrongdoers in respect of the same loss it will not be just and equitable for the primary criminal wrongdoer to be entitled to a contribution from the secondary civil wrongdoer. In this case the civil wrongdoer was entitled to a full indemnity from the criminal wrongdoer.

Case Background

The case concerned a claim by Defender Limited ("Defender") against HSBC Institutional Trust Services (Ireland) Limited ("HSBC ITSI"). Defender is an investment fund which had invested in the Madoff ponzi scheme through its custodian, HSBC ITSI. Defender claimed that HSBC ITSI had been negligent and had breached its contractual duties in its failure to properly monitor Bernard Madoff and his company and to minimise the risks that the Madoff structure posed.

Section 17 of the CLA provides that a concurrent wrongdoer can be released from their obligations to the injured person in the circumstances prescribed in the CLA. This is subject to an analysis of the respective degrees of fault of the concurrent wrongdoers.

It was argued by HSBC ITSI that it should be indemnified from any obligation to make payments to Defender, on the basis that, a settlement agreement had been entered into between Defender and Bernard Madoff's company (the "Settlement Agreement"). Therefore the CLA applied to protect HSBC ITSI. Defender had invested $540 million with Madoff and expected pursuant to the Settlement Agreement to receive approximately 75% of the amount invested by it. The claim against HSBC was for $141 million, being approximately 25% of the amount invested by Defender. HSBC ITSI claimed the Settlement Agreement constituted a release or an accord for the purpose of the CLA which would result in Defender being identified as a wrongdoer with Madoff, therefore reducing any claim of Defender against HSBC ITSI. The level of reduction claimed in this case was 100%.

Applicability of New York...