The December 2018 High Court decision in Defender v HSBC Institutional Trust Services DAC highlighted the need for plaintiffs to understand the blameworthiness of all wrongdoers before settling a claim against any of the wrongdoers.(1) This case concerned Defender, a fund which invested with Bernard Madoff and subsequently suffered a loss when Madoff was revealed to be operating the world's largest Ponzi scheme.
When Madoff's Ponzi scheme was uncovered, the US Securities Investor Protection Corporation appointed a trustee to manage Madoff's bankruptcy. Defender made a claim in the US bankruptcy and settled its claim with the US trustee as against Madoff and his company. HSBC argued that this settlement had the effect of eliminating Defender's claim against HSBC by virtue of the Civil Liability Act.
Mr Justice Twomey held that Sections 17(2) and 35(1)(h) of the Civil Liability Act 1961 had the effect of associating the plaintiff (Defender) with the actions of the wrongdoer with whom it had settled (Madoff), and reducing the claim against the defendant (HSBC) by the amount which the other wrongdoer would have been liable to contribute to the defendant, had it paid the plaintiff's total claim. In this case, as Madoff was 100% blameworthy, the effect of the settlement was to reduce Defender's claim against HSBC to zero.
Endnotes
(1) Further information is available here.
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