The High Court has ordered HSBC to provide Defender Limited with witness statements from earlier proceedings involving funds associated with Bernie Madoff, while refusing discovery of most statements from a separate settled case.
In an ex tempore judgment delivered on 15 October 2018, Mr Justice Twomey ruled on Defender’s discovery applications in its negligence and breach of contract case against HSBC Institutional Trust Services (Ireland) Limited. Defender alleges that HSBC was negligent in its role as custodian of funds lost through fraud by its alleged sub-custodian, Bernard L. Madoff Investment Securities LLC. The judgment describes the claim as approximately $333 million.
Defender sought statements and expert reports from the Thema and Primeo proceedings, saying they could reveal inconsistencies in evidence given by HSBC witnesses. HSBC objected on grounds including delay, relevance and necessity, and claimed privilege over statements from the Thema case that had been served but not adopted in court.
The court rejected HSBC’s objections based on delay and lack of relevance or necessity to discovery of the Primeo statements. It held that statements adopted by witnesses in the Primeo trial had lost privilege and must be provided. The court also held that service of a witness statement on the opposing party does not, by itself, end privilege: in general, privilege continues until the statement is adopted or otherwise put into the public arena.
The Thema case had settled after 17 days of hearings. The judge found it closely connected to Defender’s case, both because HSBC Institutional Trust Services (Ireland) Limited was a party to each and because the cases concerned similar allegations about HSBC entities’ use of a Madoff company as sub-custodian. That connection meant privilege over the Thema statements was not lost merely because those proceedings had ended.
There were two exceptions. The judge found that Christine Coe’s Thema statement had been effectively opened in court when HSBC counsel quoted from it and summarised parts of it during cross-examination, even though Coe did not give evidence before settlement. That statement had lost privilege and was to be disclosed. HSBC also conceded that Jack R. Wiener’s Thema statement had been opened in court or adopted by the witness; it too was to be disclosed.
The order therefore granted discovery of the Primeo witness statements that had lost privilege at trial, alongside the Coe and Wiener statements from Thema. Other Thema statements remained privileged and were not to be provided. The judgment resolved these discovery motions; it did not decide the merits of Defender’s underlying claim.