Stone & Rolls Ltd v Moore Stephens (a firm)

Stone & Rolls Ltd v Moore Stephens (a firm)

The claim by S&R is not barred by ex turpi causa because, although the fraud is attributable to the company via Mr Stojevic, the maxim does not operate to defeat the claim where recovery would not enure to the benefit of the perpetrator and the creditors are the indirect beneficiaries. The 'very thing' test from Reeves applies, and the conscience of the ordinary citizen would not be affronted by permitting the claim. However, the claim for compound interest is unsustainable and must be struck out.

Parties
Claimant: Stone & Rolls Limited (in Liquidation); Defendant: Moore Stephens (A Firm); Defendant: Moore Stephens LLP
Jurisdiction
England and Wales
Judgment Date
27 July 2007
Procedural Posture
Civil / Application for Strike Out And/or Summary Judgment
Outcome
Application to strike out or dismiss the entire claim fails; claim for compound interest struck out.
Legal Topics
Auditor Liability, Ex Turpi Causa, Attribution of Knowledge, Compound Interest, Contributory Negligence
Company Law Tort Law Professional Negligence Auditor Liability Ex Turpi Causa Attribution of Knowledge Compound Interest Contributory Negligence

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Parties

Stone & Rolls Limited (in Liquidation)

Claimant

Moore Stephens (A Firm)

Defendant

Moore Stephens LLP

Defendant

Procedural Posture

Civil / Application for Strike Out And/or Summary Judgment

Legal Issues

  1. 1 Whether the claim by a company against its auditors is barred by ex turpi causa due to the company's own fraud
  2. 2 Whether the knowledge and conduct of the controlling mind (Mr Stojevic) is attributable to the company for purposes of the ex turpi maxim
  3. 3 Whether the claim for compound interest is sustainable

Ratio Decidendi

The claim by S&R is not barred by ex turpi causa because, although the fraud is attributable to the company via Mr Stojevic, the maxim does not operate to defeat the claim where recovery would not enure to the benefit of the perpetrator and the creditors are the indirect beneficiaries. The 'very thing' test from Reeves applies, and the conscience of the ordinary citizen would not be affronted by permitting the claim. However, the claim for compound interest is unsustainable and must be struck out.

Court Disposition

Application to strike out or dismiss the entire claim fails; claim for compound interest struck out.

Orders

  • Paragraph 398 of the Particulars of Claim and Schedule 3 struck out.
  • Court will hear parties on terms of the Order and ancillary matters upon formal hand-down.