The High Court has refused an application by Thema International Fund PLC to amend its statement of claim and reply in litigation arising from the Bernie Madoff fraud. Mr Justice Charleton ruled that the existing pleadings already adequately reflected the case Thema intended to make.
The application concerned a proposed addition to the opening paragraph of the statement of claim. It would have said that Thema brought the proceedings “on its own behalf and on behalf of its shareholders”. All other proposed amendments had been agreed, the judgment said.
The judge said the case was being prepared for trial, listed for 23 April 2013. Thema claims losses of about $1 billion. Its existing claim alleges duties arising from its relationship with HSBC Institutional Trust Services (Ireland) Limited, including duties under the 2003 UCITS Regulations and a custody agreement. It also alleges that appointing Madoff as subcustodian breached duties or contractual obligations. Those allegations had not been determined at this stage.
HSBC’s defence, as summarised in the judgment, raised limitation and denied negligence or other breaches. It also alleged contributory negligence by Thema, including in connection with Madoff’s appointment. HSBC had joined Thema Asset Management Limited and 20:20 Medici AG as third parties, alleging responsibility for the events. The judge stressed that he had heard no evidence and expressed no view on who was responsible for choosing Madoff or failing to investigate him.
The judgment discussed the potential overlap between Thema’s claim to recover investment money and claims brought by unit-holders. It referred to Regulation 43, which provides for trustee liability to an investment company and unit-holders for certain losses. The judge said the legal position on any recovery by unit-holders was not before him in this application.
In considering the amendment, Mr Justice Charleton said pleadings may be amended where that helps put the real issues in dispute before the court, but a late amendment may be refused where it is unclear what it adds or could cause prejudice and delay. He considered the possibility that the amendment might affect how responsibility and any damages were assessed, but said he could not comment on whether that scenario would arise. He also recorded that the application appeared to have been made out of caution.
The court refused the amendment, concluding that the existing pleadings adequately reflected Thema’s case. It did not decide liability, the amount of any recoverable loss, or the rights of unit-holders.