The company claimed against its chartered accountants for negligence when acting as auditors. The sole directing mind of the company had used it as a vehicle for substantial frauds. The court was asked ‘whether and if so when can a claim by a company against its auditors infringe the maxim, still familiarly expressed in Latin, that ex turpi causa non oritur actio.’
Held: The company itself were primarily, and not just vicariously, responsible for the fraudulent conduct and that the Hampshire Land principle did not apply. However, ex turpi causa could not prevent a claim founded on fraud that would not have occurred had Moore Stephens properly complied with their ‘very duty’ as auditors of the company.
Judges:
Langley J
Citations:
[2007] EWHC 1826 (Comm), [2008] Bus LR 304, (2007) 157 NLJ 1154, [2008] PNLR 4, [2008] 1 BCLC 697
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Re Hampshire Land Company 9-Jul-1896
A company had borrowed from a building society. The borrowing was not properly authorised by resolution of the shareholders in general meeting The court was asked whether whether the knowledge of the company secretary common to both the company and . .
Cited by:
Appeal from – Moore Stephens (A Firm) v Stone and Rolls Ltd CA 18-Jun-2008
The company claimed against its accountants for negligence in not discovering the substantial dishonesty of the claimant’s employee, its directing mind and sole shareholder.
Held: Rimer LJ said that the critical question was whether it was . .
At First Instance – Moore Stephens (A Firm) v Stone Rolls Ltd (in liquidation) HL 30-Jul-2009
The appellants had audited the books of the respondent company, but had failed to identify substantial frauds by an employee of the respondent. The auditors appealed a finding of professional negligence, relying on the maxim ex turpi causa non . .
Lists of cited by and citing cases may be incomplete.
Professional Negligence
Updated: 24 April 2022; Ref: scu.259323