In August 2017, following a trial lasting almost 4 months, the Grand Court handed down its judgment in the proceedings brought by Primeo Fund (in Official Liquidation) ("Primeo") against Bank of Bermuda (Cayman) Limited ("BoBC") and HSBC Securities Services (Luxembourg) S.A. ("HSSL") in their respective capacities as administrator and custodian of Primeo. The claim sought damages of approximately $2 billion from BoBC and HSSL (together, the "Respondents") for their alleged failings as professional service providers to the fund, which had unwittingly invested in Bernard Madoff's Ponzi scheme.

In the final judgment issued prior to his retirement, the Hon. Justice Jones QC found HSSL liable for the wilful default of Bernard L Madoff Investment Securities LLC ("BLMIS"), its sub-custodian, and that BoBC was grossly negligent from May 2005 onwards for relying solely upon information from BLMIS in order to calculate Primeo's NAV. However, the Judge ultimately dismissed Primeo's claim on the basis that Primeo was "to a very substantial degree the author of its own misfortune" and that it had failed to establish the relevant causal link between such acts or omissions and the loss it claimed to have suffered. Certain elements of the claim also failed because they were held to be time-barred and infringing upon the rule against reflective loss.

Primeo appealed the judgment, which was promptly followed by the Respondents' notice that the judgment should be affirmed on other grounds and their cross-appeal against Judge's decisions on the custody claim against HSSL and the administration claim against BoBC. The Cayman Islands Court of Appeal (the "CICA") recently finished hearing the appeal during a two week long hearing which concluded on 7 December 2018.

There remain a number of ongoing claims by various of the so-called Madoff feeder funds against their former administrators and custodians (many of which are related entities of BoBC and HSSL) in a number of different jurisdictions.  One such claim, which played a central role in the judgment on the issue of reflective loss, is a claim in Luxembourg by Herald Fund SPC (in Official Liquidation) ("Herald")*.  The appeal concerns a number of important legal principles (including the proper application of the reflective loss principle).  It is anticipated that the CICA will hand down its decision during the first half of 2019.

*Walkers act for the Principal Liquidators and the Additional Liquidator of Herald 

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