“He suffers actual damage by parting with his money and receiving in exchange property worth less than the price he paid.”
“When, then, does the lender first sustain measurable, relevant loss?”
“The first step in answering this question is to identify the relevant measure of loss. It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position. Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property. When this is so, a professional negligence claim calls for a comparison between the plaintiff's position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in the case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower’s covenant and the true value of the overvalued property.”
“Ascribing a value to the borrower's covenant should not be unduly troublesome. A comparable exercise regarding lessees’ covenants is a routine matter when valuing property. Sometimes the comparison will reveal a loss from the inception of the loan transaction. The borrower may be a company with no other assets, its sole business may comprise redeveloping and reselling the property, and for repayment the lender may be looking solely to his security. In such a case, if the property is worth less than the amount of the loan, relevant and measurable loss will be sustained at once. In other cases the borrower's covenant may have value, and until there is default the lender may presently sustain no loss even though the security is worth less than the amount of the loan. Conversely, in some cases there may be no loss even when the borrower defaults. A borrower may default after a while but when he does so, despite the overvaluation, the security may still be adequate.”
“It requires the parties, when a matter becomes the subject of litigation between them in a court of competent jurisdiction, to bring their whole case before the court so that all aspects of it may be finally decided (subject, of course, to any appeal) once and for all. In the absence of special circumstances, the parties cannot return to the court to advance arguments, claims or defences which they could have brought forward for decision on the first occasion but failed to raise. The rule is not based on the doctrine of res judicata in a narrow sense, nor even on any strict doctrine of issue or cause of action estoppel. It is a rule of public policy based on the desirability, in the general interest as well as that of the parties themselves, that litigation should not drag on for ever and that a defendant should not be oppressed by successive suits when one would do. That is the abuse at which the rule is directed.”
“The conduct of a cause at trial is governed by, and the questions asked of the witnesses are directed to, the points then suggested. And it is obvious that no care is exercised in the elucidation of facts not material to them.”
“In a contest purely between one litigant and another … the task of the court is to do, and be seen to be doing, justice between the parties … There is no higher or additional duty to ascertain some independent truth. It often happens, from the imperfection of evidence, or the withholding of it, sometimes by the party in whose favour it would tell if presented, that an adjudication has to be made which is not, and is known not to be, the whole truth of the matter: yet if the decision has been made in accordance with the available evidence and with the law, justice will have been fairly done.”
“the rule is that, if a point was not taken before the tribunal which hears the evidence, and evidence could have been adduced which by any possibility would prevent the point from succeeding, it cannot be taken afterwards. You are bound to take the point in the first instance, so as to enable the other party to give evidence.”
“a Court of Appeal ought only to decide in favour of an appellant on a ground there put forward for the first time, if it be satisfied beyond doubt, first that it has before it all the facts bearing upon the new contention, as completely as would have been the case if the controversy had arisen at the trial; and next, that no satisfactory explanation could have been offered by those whose conduct is impugned if an opportunity for explanation had been afforded them when in the witness box.”
“It is not disputed that BLMIS was conducting a fraudulent Ponzi scheme at all material times and that it wilfully breached its duties as sub-custodian by misappropriating and/or misusing Primeo’s money and covering up its fraud by issuing false statements of account. Mr Smith’s argument is that, for the purposes of strict liability under Clause 16(B), the appropriate analysis of Primeo’s loss is perfectly straightforward. He says that the loss is simply the net amount of cash placed with BLMIS and dissipated in the Ponzi scheme during the relevant period. For these purposes the relevant period runs from7 August 2002 (when the 2002 Sub-Custody Agreement was executed) until1 May 2007 (when the Herald Transfer took place and BLMIS’ role as sub-custodian came to an end). The plaintiff’s case is that [HSBC] is liable to make good this loss, subject to giving credit for the actual recoveries which it has received.”
“222. Mr Smith sought to advance not only a claim for damages measured by the cash misappropriated less all recoveries received. He also sought to advance a claim on appeal for the difference between the value of the BLMIS assets for which he said [HSBC] assumed a custodian responsibility when it became Custodian of those assets following the 2002 Sub-Custody Agreement, and their actual value, less any recoveries. At trial, it was Primeo’s primary case that [HSBC] had been custodian of the BLMIS assets with BLMIS as its sub-custodian from the inception of the 1994 Brokerage Agreements and that [HSBC] was liable on a safekeeping basis for the loss in value of the BLMIS assets. However, Mr Smith did not advance below a specific safekeeping damages case tailored to apply to the hypothesis that [HSBC] only became Custodian of the BLMIS assets and BLMIS its sub-custodian from7 August 2002 . 223. In our judgment, it would not be right to allow Primeo to seek to enlarge its recovery in the manner sought on appeal. Whether Primeo had a safekeeping claim based on custodial responsibility assumed by [HSBC] after7 August 2002 was a matter to be decided at the trial on such evidence as was relevant to this issue. Such a case not having been advanced below, we hold that Primeo cannot advance it in this appeal.”
“Primeo submitted in closing that BLMIS was [HSBC]’s sub-custodian continuously from the inception of the 1993 Custodian Agreement down to the Herald Transfer. If this were wrong, BLMIS became [HSBC]’s sub-custodian on the execution of the 1996 Brokerage Agreements; and if this were wrong, BLMIS became a sub-custodian of [HSBC] when the 2002 Sub-Custody Agreement was concluded.” (Emphasis added)
“If the overall outcome of this appeal were that Primeo had established an entitlement to damages on its strict liability claim, there would be an order that the damages were to be assessed by a judge sitting in the Financial Services Division of the Grand Court. Since we are not in a position to decide if the broker/custody account was a running account or whether the application of Clayton’s Case would be contrary to the parties’ intentions, or whether in the circumstances of this case Primeo is entitled to appropriate redemption payments as it sees fit, the question as to appropriation in general and whether the rule in Clayton’s Case was to apply would be referred to the judge assigned to deal with the assessment of damages.”
“According to the law of England, the person paying the money has the primary right to say to what account it shall be appointed; the creditor, if the debtor makes no appropriation, has the right to appropriate; and if neither of them exercises the right, then one can look on the matter as a matter of account and see how the creditor has dealt with the payment, in order to ascertain how in fact he did appropriate it”
“Madoff’s team might have successfully deceived E&Y, as they did in fact deceive KPMG, in which case an unqualified audit opinion would have been issued without the need for any custody confirmation from [HSBC]. In this event, Primeo would have continued placing new money on the managed account. On the other hand, E&Y might have attempted to obtain a confirmation directly from BNY [Bank of New York] which might conceivably have led to the exposure of the Ponzi scheme. In this event, BLMIS would have been put into liquidation and Primeo would have had no opportunity to withdraw its funds or, at least, not without exposing itself to a claw-back claim. Within those two extremes, there is the possibility that E&Y would have come away from BLMIS with an inconclusive result, but without actually suspecting the existence of any fraud or impropriety which would need to be reported to the regulators.”
“If E&Y (or some other auditor approved by CIMA) had been willing to issue an unqualified audit opinion and continue in office as Primeo’s statutory auditor, the board would not have considered terminating the BLMIS managed account simply because [HSBC] considered the operational risks associated with BLMIS to be unacceptable and were threatening to resign. … If E&Y had issued an unqualified audit opinion without having any custody confirmation, Primeo would not have withdrawn its investment in BLMIS or redeemed its Herald and Alpha shares.”
“Even allowing for Bank Austria/Primeo’s enthusiasm for Mr Madoff, we find it less than probable that, in these circumstances, having withdrawn the assets from BLMIS, the directors would nevertheless immediately reinvest the funds with BLMIS despite their custodian, their administrator and their auditors all saying that they had been unable to verify that the assets really existed. We consider a contrary conclusion to be outside the band of decisions reasonably open to the trial judge.”
“(1) Subject to subsection (3), where in the case of any action for which a period of limitation is prescribed by this Act, either – (a) the action is based upon the fraud of the defendant; (b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or (c) the action is for relief from the consequences of a mistake; the period of limitation does not begin to run until the plaintiff has discovered, or could with reasonable diligence have discovered, the fraud, concealment or mistake. References in this subsection to the defendant include references to the defendant’s agent, and to any person through whom the defendant claims, and his agent. (2) For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”
“First, the starting point is the natural meaning of ‘deliberate’ acts. This connotes consciously performing an act intending its consequences. It involves a different state of mind to recklessness.”
“The question is whether the words ‘deliberate commission of a breach of duty’ in section 32(2) of the 1980 Act mean ‘deliberate commission of [an act or omission, being an act or omission which gives rise to] a breach of duty’, or simply mean ‘deliberate breach of duty’. If the latter, then they refer only to a breach of duty which has been committed intentionally.”
“If the claimant can show that the defendant knew he was committing a breach of duty, or intended to commit the breach of duty – I can discern no difference between the two formulations; each would constitute, in my opinion, a deliberate commission of the breach – then, if the circumstances are such that the claimant is unlikely to discover for some time that the breach of duty has been committed, the facts involved in the breach are taken to have been deliberately concealed for subsection (1)(b) purposes”
“Section 32(1)(b) and section 32(2) of the 1980 Act were designed to clarify and, if necessary, change the law by removing all reference to fraud and substituting the more appropriate concept of ‘deliberate concealment’. In such circumstances reference to the antecedent statute and case law is of limited value, since there can be no assumption that the later statute merely reproduced the pre-existing law.”
“I would start by adopting the approach prescribed by Lord Browne-Wilkinson in the Sheldon case. Unless there is some ambiguity in the statutory language, recourse to legislative history is unnecessary and impermissible. The relevant words in section 32(2) are ‘deliberate commission of a breach of duty … amounts to deliberate concealment of the facts involved in that breach of duty’. These are clear words of English.”
“As I have explained, in enacting the 1980 Act Parliament substituted ‘deliberate concealment’ for ‘concealed fraud’. This is a different and more appropriate concept. It cannot be assumed that the law remained the same.”
“The effect of Brocklesby v Armitage & Guest [(Note)[2002] 1 WLR 598 ] is to deprive a professional man, charged with having given negligent advice and who denies that his advice was wrong let alone negligent, of any effective limitation defence. However stale the claim, he must defend the action on the merits … This subverts the whole purpose of the Limitation Acts. The harshness of the rule is evident. In the absence of any intentional wrongdoing on his part, it is neither just nor consistent with the policy of the Limitation Acts to expose a professional man to a claim for negligence long after he has retired from practice and has ceased to be covered by indemnity insurance.”
“References in this subsection to the defendant include references to the defendant’s agent, and to any person through whom the defendant claims, and his agent.”
“Any such acknowledgment or payment as aforesaid may be made by the agent of the person by whom it is required to be made under the last foregoing section, and shall be made to the person, or to an agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made.”
“Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his legal relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation”
“An obvious meaning of the word ‘agent’ is ‘someone who acts for or on behalf of another’. … The paradigm reasoning, on which much of the rest of agency law is based, is that one person, usually called the principal, can give authority to, or authorize, another, the agent, to act on his behalf; and that the giving of authority confers on the agent a power to affect the legal position of the person who gave the authority.” (A Burrows (ed), Principles of English Commercial Law, 2015, para 1.01). As it was put by the High Court of Australia (Dixon, Fullagar and Kitto JJ) in Petersen v Moloney(1951) 84 CLR 91 , 94, an agent is “a person who is able, by virtue of the authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal, and third parties.”
“He cannot divest himself of this duty, though he may – and, if it involves technical management and he is not himself technically qualified, must – perform it through the agency of an employee. It remains the owner’s obligation, and the agent whom the owner appoints to perform it performs it on the owner’s behalf. The owner remains vicariously responsible for the negligence of the person whom he has appointed to perform his obligation for him, and cannot escape liability by merely proving that he has appointed a competent agent. If the owner’s duty has not been performed, no matter how competent the agent selected by the owner to perform it for him, the owner is responsible.”
“There is perhaps a risk of confusion if we speak of the duty as one which can, or cannot, be delegated. The true question is, What is the extent of the duty attaching to the employer? Such a duty is the employer’s personal duty, whether he performs or can perform it himself, or whether he does not perform it or cannot perform it save by servants or agents.”
“… it is quite plain that Mr Piper, the builder, was the ‘agent’ of Mr Moss. Mr Moss employed Mr Piper to carry out the building work. Mr Piper did the work extremely badly. He was guilty of gross neglect in mixing the concrete. He covered up his disgraceful work. Even if Mr Moss knew nothing about it, nevertheless he must take responsibility for the conduct of Mr Piper.”
“I think the word ‘agent’ as here used embraces an independent contractor.
“… when I speak of the defendant, I include, of course, his agent: for the statute expressly mentions him. If a defendant employs a contractor to do something for him - and one or other knows that it may well be a wrong or a breach of contract - and keeps quiet about it, then the right of action is concealed by fraud and the defendant cannot avail himself of the statute.”
“In performing its duties hereunder the Custodian [HSBC] may appoint such agents, sub-custodians and delegates as it might think fit to perform in whole or in part any of its duties and discretions (including in such appointment powers of sub-delegation)”
“All Property required hereunder to be held in the Account shall be physically segregated from the general assets of the Sub-Custodian … and the Sub-Custodian shall mark its records so as to identify Property as Property held in a fiduciary capacity to the order of the Bank.”
“Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage: Provided that – (a) this subsection shall not operate to defeat any defence arising under a contract; and (b) where any contract or enactment providing for the limitation of liability is applicable to the claim, the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable.”
“‘fault’ means negligence, breach of statutory duty or other act or omission which gives rise to a liability in tort or would, apart from this Law, give rise to the defence of contributory negligence.”
“‘fault’ means an act creating a liability in tort [or] which, prior to the operation of this Law, would have given rise to the defence of contributory negligence;”
“‘fault’ means negligence, breach of statutory duty or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence.”
“I appreciate that the construction which I have adopted may well lead in some cases to unsatisfactory results. Thus it may be that a plaintiff will be able to avoid the apportionment provisions by suing in contract when a claim in tort would be as or more appropriate. But this is not a problem for a judge at first instance to attempt to solve by placing a strained construction on a statute. The matter may, however, be a suitable topic for study by those with responsibilities for law reform. Indeed, I see great force in the contention that the same rule should apply to claims whether they are based in contract or tort where the act complained of involves the breach of a duty of care.”
“It is commonplace that actions are brought by persons who have suffered personal injuries as a result of the negligence of the person sued and that there is a contractual as well as tortious relationship. In such cases apportionment of blame is invariably adopted by the court notwithstanding that the plaintiff could sue in contract as well as in tort.”
“… the correct analysis is that where there is independently of contract a status or common law relationship which exists between the parties and which can then give rise to tortious liabilities which fall to be adjusted in accordance with the 1945 Act, the relevant question in any given case is whether the parties have by their contract varied that position. Here they patently have not.”
“If this contention is sound then the law has been sadly adrift for a very long time for it would mean that in employers’ liability cases an injured employee could debar the employer from relying on any contributory negligence by framing his action in contract.”
“Had contributory negligence been a defence at common law to a claim for damages for breach of contract the reports and the textbooks prior to 1945 would have been full of references to it.”
“To regard the definition of fault in section 4 as extending to cases such as employer’s liability places no great strain on the construction of the words used. In 1945 actions brought by an employee whether framed in contract or tort were usually regarded as actions in negligence and the defence of contributory negligence was by no means uncommon.”
“To my mind, the Act provides its own interpretation if it is acceptable to regard the definition of ‘fault’ in s 2 as comprising two limbs – the first referable to the defendant’s conduct, the second to the plaintiff’s conduct. Section 2 defines ‘fault’ as meaning ‘negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort’ (the first limb). It then goes on to include any act or omission which ‘would, apart from this Act, give rise to the defence of contributory negligence’ (the second limb). In my view, the first limb of the definition is plainly directed to defining ‘fault’ as it relates to the conduct of the defendant – in other words, as it relates to the plaintiff’s cause of action. This phrase is qualified by the expression ‘which gives rise to a liability in tort’. It follows that no negligence, breach of statutory duty and no other act or omission of the defendant will bring s 3(1) into play unless it is one which gives rise to liability in tort. In other words, the Act applies only when the plaintiff’s cause of action is in respect of some act or omission for which the defendant is liable in tort. Conceivably, the defendant may be concurrently liable in contract – but that is immaterial – the sine qua non is conduct creating liability in tort. The second limb of the definition is concerned with and is referable only to the conduct of the plaintiff. It relates not to any cause of action but to conduct which, prior to the Act, would give rise to the defence of contributory negligence and which is now to be regarded as that conduct on the part of a plaintiff which will lead not to a complete defence but to a reduction in damages. Before the enactment of the Contributory Negligence Act, the defence of contributory negligence was a complete defence in tort: it was not a defence in contract – where the issue was more likely to be simply causation. I therefore conclude, in the absence of any clear authority to the contrary, that the first limb of the definition of s 2 determines the meaning of the word ‘fault’ as it relates to the plaintiff’s cause of action: that accordingly, the Contributory Negligence Act cannot apply unless the cause of action is founded on some act or omission on the part of the defendant which gives rise to liability in tort: that if the defendant’s conduct meets that criterion, the Act can apply – whether or not the same conduct is also actionable in contract. By the same token – the second limb of the definition means simply and logically that no act or omission of the plaintiff will entitle the defendant to a reduction of damages unless it amounts to the sort of conduct which, prior to the enactment of the Contributory Negligence Act, would have afforded a defence of contributory negligence. I turn then to the second question – whether the plaintiff’s cause of action is founded solely in contract or whether it is, concurrently, a claim in tort.”
“Just as, once a retainer has been accepted, the content of the duty of care in such a case is identical whether derived from theoretical sources of tort, contract or equity, or as I think from all of them in a situation where they overlap, so in my opinion its source or sources do not affect the power to apportion.”
“But when the nature of an action for breach of a contractual term to take reasonable care and the nature of an action in tort for breach of a general law duty of care are examined, it is by no means evident that there is anything anomalous or unfair in a plaintiff who sues in contract being outside the scope of the apportionment legislation. Tort obligations are imposed on the parties; contractual obligations are voluntarily assumed.”
“Absent some contractual stipulation to the contrary, there is no reason of justice or sound legal policy which should prevent the plaintiff in a case such as the present recovering for all the damage that is causally connected to the defendant’s breach even if the plaintiff’s conduct has contributed to the damage which he or she has suffered. By its own voluntary act, the defendant has accepted an obligation to take reasonable care and, subject to remoteness rules, to pay damages for any loss or damage flowing from a breach of that obligation. If the defendant wishes to reduce its liability in a situation where the plaintiff’s own conduct contributes to the damage suffered, it is open to the defendant to make a bargain with the plaintiff to achieve that end. In contract, the plaintiff gives consideration, often very substantial consideration, for the defendant’s promise to take reasonable care. The terms of the contract allocate responsibility for the risks of the parties’ enterprise including the risk that the damage suffered by one party may arise partly from the failure of that party to take reasonable care for the safety of that person’s property or person.”
“Perhaps the apportionment statute should be imposed on parties to a contract where damages are payable for breach of a contractual duty of care. If it should, and we express no view about it, it will have to be done by amendment to that legislation. If courts are to give effect to the will of the legislature, it is not possible to do so having regard to the terms of apportionment legislation, based on the United Kingdom legislation of 1945, and the evil that it was designed to remedy.”
“… a claim in respect of [relevant damage] shall not be defeated by reason of the fault [ie, as defined, the contributory negligence] of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced [etc]”
“… the expression ‘fault’ means wrongful act, breach of statutory duty or negligent act or omission which gives rise to liability in damages, or would apart from this Act, give rise to the defence of contributory negligence; …”
“[c]ontributory negligence in a plaintiff only means that he himself has contributed to the accident in such a sense as to render the defendant’s breach of duty no longer its proximate cause” (see also p 697). Clearly, on this analysis, contributory negligence would be a defence whether the negligence claim was framed in contract or in tort. At pp 698-699 Bowen LJ said: “The law is full of instances where duties assume a double aspect and may be viewed concurrently as arising by implication out of a contract, or as created by some wider principle of law which happens to take effect and to receive apt illustration in the particular instance of some particular contract. It is in most cases a barren and metaphysical inquiry to discuss whether such duties are best treated as arising by implication from the contract or from the general law outside …”
“… The Custodian [HSBC] will use due care and diligence in the appointment of suitable sub-custodians and must be satisfied for the duration of the sub-custody agreements as to the ongoing suitability of the sub-custodians to provide custodial services to the Company [Primeo] …. [and] will require the sub-custodian to implement the most effective safeguards available under the laws and commercial practices of the sub-custodian’s jurisdictions in order to ensure the most effective protection of the Company’s assets.”
“The Custodian shall not, in the absence of negligence or wilful breach of duty on the part of the Custodian or any agent, delegate or sub-custodian, be liable to the Company ... for any act or omission … in the course of or in connection with the services rendered by it hereunder or for any loss or damage which the Company may sustain or suffer as a result or in the discharge by the Custodian of its duties hereunder or pursuant thereto.... The Company agrees to indemnify the Custodian from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (other than those resulting from the negligence or wilful breach of duty on the part of the Custodian or any agent appointed by it) which may be imposed on, incurred by or asserted against the Custodian in performing its obligations or duties hereunder. ”