In a long-awaited and wide-ranging judgment delivered on 15 November 2023,1 the Judicial Committee of the Privy Council has dismissed2 the appeal by Primeo Fund (in Official Liquidation) ("Primeo") against the 2019 dismissal of its appeal to the Cayman Islands Court of Appeal of the dismissal of its claims against two HSBC Group companies by the Grand Court of the Cayman Islands in 2017.

Primeo, a Cayman Islands hedge fund, had invested into Bernard Madoff's infamous Ponzi scheme, and claimed damages of c.US$2 billion against its former fund administrator and custodian, Bank of Bermuda (Cayman) Ltd ("BBCL") and HSBC Securities Services (Luxembourg) S.A. ("HSSL") (together, the "Respondents").

The judgment – which was reserved for more than two years prior to its delivery – addresses a host of substantive legal issues, including strict liability, causation, limitation and contributory negligence, as well as procedural issues concerning the principle of the finality of litigation.

Although Primeo's appeal was ultimately dismissed by the Privy Council, the Board overturned the Court of Appeal's judgment in numerous respects. The judgment represents the final dismissal of Primeo's claims against the Respondents after more than a decade of hard-fought litigation.

Campbells LLP represented the successful Respondents throughout the litigation.


The background to the litigation is complex, and addressed in our earlier advisories concerning the Grand Court3 and Court of Appeal4 judgments.

The parties and claims

In short, Primeo was established and managed by Bank Austria. From 1993 until December 2008, Primeo invested with Bernard L Madoff Investment Securities LLC ("BLMIS"), through which Bernard Madoff perpetrated his Ponzi scheme. Between 1993 and 2003, Primeo held a managed account with BLMIS. From 2003, Primeo also began investing with BLMIS indirectly, via shareholdings in two other Madoff feeder funds, Herald and Alpha. Following an in specie transfer on 1 May 2007 (the "Herald Transfer"), all of Primeo's investments with BLMIS were via its shareholdings in Herald and Alpha.

The Respondents were Primeo's fund administrator and custodian respectively, having been appointed at a time when both entities were part of the Bank of Bermuda group of companies, which later became part of the HSBC Group in 2004.

Following Madoff's arrest in 2008, Primeo entered liquidation and in February 2013 the joint official liquidators of Primeo sued the Respondents for the alleged losses suffered by Primeo as a result of the fraud.

Primeo alleged that HSSL (qua custodian) had breached its contractual duties concerning the appointment and supervision of BLMIS as its sub-custodian, and was in any event strictly liable for the wilful default of BLMIS. Primeo alleged that BBCL (qua administrator) breached its duties to maintain Primeo's books and records, and to determine its net asset value from time to time. Primeo alleged that, had the Respondents complied with their duties, Primeo would have withdrawn its investments with BLMIS prior to the fraud being uncovered and reinvested the proceeds elsewhere, generating a significant profit.

Grand Court and Court of Appeal decisions

At a four month trial in the Grand Court in 2016 and 2017, Mr Justice Jones QC (the "Judge") heard evidence from 27 factual and expert witnesses including three of Primeo's former directors and a number of experts in the fields of investment management, custody and fund administration. In its judgment delivered in August 2017, the Grand Court dismissed Primeo's claims in their entirety, on the grounds of reflective loss, causation and limitation. The Judge determined that he would in any event have reduced any damages awarded against BBCL by 75% on account of Primeo's contributory negligence in circumstances where he found Primeo was "to a very substantial degree, the author of its own misfortune".

Following a ten day appeal in 2018, the Court of Appeal overturned the Judge's judgment in certain respects but ultimately dismissed Primeo's appeal on the basis that its claims were barred by the rule against the recovery of reflective loss. A more detailed summary of the Court of Appeal's findings is set out in our advisory concerning the Court of Appeal's judgment.5

Primeo then appealed to the Privy Council on numerous grounds, and the Respondents cross-appealed, seeking to uphold the Court of Appeal's dismissal of Primeo's appeal on additional grounds.

Privy Council proceedings

The Privy Council proceedings were bifurcated, with the potentially dispositive issue of reflective loss heard over two days in April 2021, following which the Privy Council delivered its judgment in August 2021, allowing that part of Primeo's appeal. Our advisory concerning that initial phase of the Privy Council appeal provides a summary of the Privy Council's judgment concerning reflective loss.6

It was therefore necessary for the Privy Council to address the balance of the appeal and cross-appeal grounds, which took place at a further four day hearing in October 2021.

The core issues on Primeo's appeal were:

  1. Whether contributory negligence is available in principle as a defence to either of the Respondents and, if so, whether it is just and equitable to apply any reduction.
  2. Regarding limitation, whether reckless breaches of contract amount to a "deliberate commission of a breach of duty" under section 37(2) of the Cayman Islands' Limitation Act (1996 Revision) (the "Limitation Act").
  3. As to assessment of damages, whether Primeo is entitled to argue, if the issue of damages were remitted to the Grand Court, that the Respondents assumed responsibility for assets purportedly held by BLMIS on the date that a 2002 Sub-Custody Agreement was entered into.
  4. The appropriate order as to the costs of the trial and appeal.

Further, the additional grounds on which the Respondents sought to uphold the Court of Appeal's dismissal of Primeo's appeal gave rise to the following issues for determination by the Privy Council:

  1. With regards to the strict liability claim against HSSL, whether duty, breach and loss are established; and whether, if Primeo's appeal is allowed, it is appropriate to remit the case to the Grand Court.
  2. With regards to the administration claim against BBCL, whether BBCL was grossly negligent.
  3. As to the Court of Appeal's approach to causation, whether: (a) the Court of Appeal erred in allowing Primeo to advance a new 'loss of chance' case for the first time on appeal; (b) if and to the extent that the Court of Appeal made findings on loss of a chance in respect of the claim against BBCL, the Court of Appeal erred because Primeo had not advanced any such case on appeal; (c) the Court of Appeal erred in overruling the Judge's finding that Primeo would have reinvested funds withdrawn from BLMIS in another BLMIS feeder fund.
  4. Regarding limitation, whether BLMIS was HSSL's "agent" for the purpose of section 37(1)(b) of the Limitation Act.
  5. As to contributory negligence, whether the Court of Appeal erred in substituting its own assessment of 50% in place of the 75% reduction determined by the Judge.

Accordingly, the second phase of the appeal concerned important legal and procedural issues relating to both substantive appeal and cross-appeal grounds, and Primeo's ability to advance an entirely new case on appeal.

Privy Council judgment

In a lengthy judgment, written collectively by the Board (comprising Lord Reed, Lord Hodge, Lord Lloyd-Jones, Lord Kitchen and Lord Sales), the Privy Council reached the following key conclusions.

Strict liability

As regards Primeo's strict liability case against HSSL, the Board found in principle that Primeo suffered recoverable loss because (i) there was an immediate loss when Primeo's cash was misappropriated each time it made an investment in BLMIS; (ii) the breach by HSSL of its strict liability custodian duties was not rectified by the Herald Transfer; and (iii) Primeo did not suffer loss in its capacity as a shareholder of Herald. Any loss suffered by Primeo was however mitigated by sums it received from BLMIS by way of redemptions in the period between August 2002 and May 2007.

However, the Board found that it was not open to Primeo to argue that HSSL assumed responsibility as custodian for the assets purportedly held by BLMIS as at 7 August 2002 (i.e. the date upon which BLMIS was appointed by HSSL as its sub-custodian, and prior to which HSSL had no custodian duties in respect of Primeo's assets). The Privy Council reached this conclusion on the grounds that Primeo had failed to advance the necessary arguments, and to adduce the necessary evidence, at the 49-day trial and that the Respondents would be prejudiced were Primeo permitted to do so on appeal.

The Board also held that the Court of Appeal erred in directing that questions of (i) appropriation in general, (ii) the existence of a running account and (iii) whether the 'first in first out' methodology known as the rule (or common law presumption) in Clayton's Case7 was to apply, should be remitted back to the Grand Court to be dealt with as part of any assessment of damages. Overruling the Court of Appeal, the Board held that Primeo should not have been permitted to raise these issues for the first time on appeal.

Consequently, Primeo had failed to establish, on the case which it presented at trial, that it suffered any loss arising from HSSL's liability as custodian during the relevant period between August 2002 and May 2007 (i.e. the date of the Herald Transfer upon which HSSL's custodian duties to Primeo ceased). This is because the value of Primeo's redemptions from BLMIS exceeded the value of its subscriptions during that period by c.US$25 million.

In reaching these conclusions, the Privy Council's judgment emphasised the importance of the principle of finality of litigation and the attendant need for commercial disputes to be resolved efficiently. In particular, if Primeo were permitted to advance a new case on appeal based upon the application of Clayton's Case, this would raise new questions of fact that, having not been pleaded, were not addressed at first instance and which would necessitate further evidence.

At trial, Primeo had advanced an alternative case that HSSL was liable as custodian from 7 August 2002 (Primeo's primary case was that HSSL was liable from 1996) but failed to lead any evidence to establish its loss on that basis other than a net cash basis, even though it was not disputed that a case based on appropriation by Primeo would require such evidence. Moreover, the trial was one of both liability and quantification of damages; any subsequent trial that might theoretically be required to determine the amount of any damages was envisaged to have been very limited and conducted by reference to the methodology already adopted by the quantum expert witnesses who gave evidence at trial.

Consequently, Primeo failed to establish any loss arising from HSSL's strict liability as custodian, and its claims against HSSL failed on that basis.


The importance of finality in litigation was also central to a significant finding by the Privy Council that the Court of Appeal had erred in allowing Primeo to advance a new causation case on a 'loss of a chance' basis on appeal.

In summary, Primeo had pleaded a causation case on the 'balance of probabilities' basis, supported by evidence from one of Primeo's former directors as to how the Primeo board would have acted in certain hypothetical counterfactual scenarios in which the Respondents had complied in full with their duties as custodian and administrator (such as warning Primeo about the unusual concentration of risk at BLMIS). Essentially, Primeo's case was that, in such circumstances, Primeo would have withdrawn its investments from BLMIS via redemptions made before the BLMIS fraud was uncovered, and therefore Primeo would not have suffered losses.

The Judge rejected Primeo's causation case – giving little weight to the former director's evidence – on the grounds that it was entirely speculative and that, on the contrary, there were strong indications that Primeo would have remained invested in BLMIS in such counterfactual scenarios.

On appeal to the Court of Appeal, Primeo argued that the Judge had erred in law by not applying a 'loss of a chance' analysis to causation rather than determining it on the balance of probabilities. This was an inherently difficult argument for Primeo to make as its case at trial made no mention of 'loss of a chance' and the Judge focussed solely on Primeo's pleaded causation case. Nonetheless, the Court of Appeal ruled that the Judge had erred and that the correctness of the legal test to be applied was a question of law that fell within the remit of the Court of Appeal to determine, which it did by finding that Primeo could advance a 'loss of chance' case on appeal.

Overruling the Court of Appeal, the Privy Council concluded that "the Court of Appeal, motivated to apply the correct law, had overlooked that a court will not normally decide issues which the parties have not raised". As the Board put it, Primeo was impermissibly seeking "a second bite at the cherry" on appeal having failed to advance such a case at trial.

In reaching this conclusion, the Board again emphasised the importance of finality in litigation, and determined that it would be unjust to require the Respondents to relitigate this issue. Any such further litigation would invariably require the parties to adduce substantial new evidence, including as to the approach that would have been taken by auditors of a fund such as Primeo in the hypothetical counterfactual scenarios posited by Primeo.

Highlighting the importance of the case presented at trial, the Privy Council endorsed the observation of Lewison LJ in Fage UK Ltd v Chobani UK Ltd8 concerning an appeal against a trial judge's findings of fact: "The trial is not a dress rehearsal. It is the first and last night of the show".

Consequently, despite Primeo having established breaches of duty by the Respondents, Primeo's fault-based claims all failed on causation.


Limitation issues arose because Primeo's claim was commenced on 20 February 2013 and the Respondents asserted a limitation defence under the Limitation Act to any causes of action that pre-dated the six-year limitation period beginning 20 February 2007. In response, Primeo relied upon section 37 of the Limitation Act which postpones the commencement of the usual six-year limitation period for contractual claims in specified circumstances, notably (per section 37(1)) where the action is based upon the fraud of the defendant and any fact relevant to the plaintiff's right of action was deliberately concealed from the plaintiff by the defendant. Pursuant to section 37(2), "for the purposes of section 37(1), the deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to a deliberate concealment of the facts involved in that breach of duty".

Thus, there was an issue as to the meaning of "deliberate commission of a breach of duty" as Primeo contended that recklessness was sufficient to constitute a deliberate breach, in which case Primeo contended that, on the basis of the findings of the lower courts, the Respondents had been reckless in the commission of various breaches of duty.

The Board rejected Primeo's argument that recklessness is tantamount to the deliberate commission of a breach of duty for these purposes. Rather, the term "deliberate" is to be given its ordinary meaning, which necessitates intentionality. In reaching this significant conclusion, the Privy Council approved the well-known House of Lords' judgment in Cave v Robinson Jarvis & Rolf9 and expressly disapproved of the more recent English Court of Appeal judgment in Canada Square Operations Ltd v Potter10. The UK Supreme Court delivered its judgment in the Canada Square proceedings,11 allowing the appeal, concurrently with the Privy Council delivering its judgment in Primeo having regard to the common limitation issue.

Secondly, in the context of Primeo's strict liability claim against HSSL, which was brought in large part after the usual six-year limitation period had expired, there was an issue as to whether any fact relevant to Primeo's right of action had been deliberately concealed from Primeo by HSSL in circumstances where the action was based upon the fraud of the defendant. If so, the limitation period would be extended by virtue of section 37(1).

Primeo's action was not based upon any fraud by HSSL, but upon the fraud of BLMIS as HSSL's sub-custodian. Primeo did not suggest that any relevant fact was deliberately concealed by HSSL, but that there was deliberate concealment by BLMIS which Primeo alleged to have been HSSL's agent for these purposes. The critical question was therefore whether BLMIS was HSSL's "agent" within the meaning of section 37(1).

Following a detailed analysis of the facts and legal authorities, the Board concluded that BLMIS was HSSL's agent with respect to the performance of HSSL's custodial duties after 7 August 2002, being the date of the first Sub-Custodian Agreement between HSSL and BLMIS. Consequently, as it was plain that BLMIS had deliberately concealed relevant facts when acting as HSSL's agent, the running of time for Primeo's strict liability claim was postponed pursuant to section 37(1).

Ultimately, however, this point was academic because Primeo suffered no actual loss within the relevant period of time the subject of its strict liability claim.

Contributory negligence

Issues pertaining to contributory negligence arose in respect of Primeo's fault-based claims, notably as Primeo and the Respondents were determined by the Judge to have had an equivalence of knowledge about the operations of, and concentration of risks at, BLMIS, such that Primeo was at least partly to blame for any losses that it suffered.

As noted above, the Judge held that if BBCL were found to have been liable to Primeo in respect of the administrator claim, any damages awarded to Primeo would have been reduced by 75% on the ground that Primeo was to a very significant extent the author of its own misfortune. On appeal, the Court of Appeal reduced this contributory negligence assessment to 50% on the basis that the Judge had failed to give due weight to the fact that BBCL was a professional administrator performing a service which included the specific task of monitoring BLMIS. The Privy Council held that the Court of Appeal was entitled to find that the Judge's assessment of a 75% reduction fell outside the range of reasonable outcomes and that the Court of Appeal's assessment of a 50% reduction was appropriate.

The Privy Council also held that contributory negligence was not available to HSSL as a partial defence to the fault-based custodian claim, as there was no equivalent breach of a duty of care in tort. In reaching this conclusion, the Privy Council upheld the well-established line of authority based upon Vesta v Butcher12 (which Primeo had argued was wrongly decided) to the effect that contributory negligence is available as a defence to a claim in contract where there exist concurrent and co-extensive duties in contract and in tort.

Ultimately, the Privy Council's findings on contributory negligence did not affect the outcome of the case, as no award of damages was made to Primeo to which any reduction could be applied.


The Board's judgment represents the final determination of Primeo's claims, which failed at every judicial level, although notably on different grounds.

This sprawling litigation addressed a variety of interesting and important legal and factual issues, culminating in the Privy Council's final word on the remaining issues concerning strict liability, causation, limitation and contributory negligence. The litigation has generated numerous reported interlocutory and final judgments, and a wealth of jurisprudence.

For litigators, the key lesson from the Privy Council judgment is the importance of advancing a complete case at the trial stage, consistent with the public interest in the efficient and proportionate resolution of disputes, and considerations of fairness and justice, rather than attempting to have a "second bite of the cherry" on appeal.


1. Primeo Fund (in Official Liquidation) v Bank of Bermuda (Cayman) Ltd and Anor [2023] UKPC 40.

2. Save in respect of certain issues that did not affect the final result.





7. Devaynes v Noble (1816) 35 ER 781

8. [2014] EWCA Civ 5; [2014] FSR 29, para 114(ii).

9. [2002] UKHL 18.

10. [2021] EWCA Civ 339; [2022] QB 1.

11. [2023] UKSC 41.

12. [1989] AC 852.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.