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The United States District Court for the Southern District of New York has dismissed an action against PwC Bermuda by investors in two ‘feeder funds’, which channelled billions of dollars into Bernard Madoff’s Ponzi scheme.

The investors claimed that PwC caused them loss by issuing clean audit opinions for the feeder funds. The Court, applying BVI/Bermuda law (based on English law), held that the claims were barred by the rule against ‘reflective loss’. The investors had no standing to sue PwC because their losses merely reflected losses made by the funds, in respect of which the funds themselves could sue PwC. This was the case even though PwC might have good contractual defences against claims by the funds. 

Barbara Dohmann QC, assisted by Fraser Campbell, provided expert evidence on behalf of PwC regarding the rule against reflective loss in English and BVI/Bermuda law.

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