Date: Mon, 19 Nov 2007 11:42

From: Charles Mitchell

Subject: Alice in Wonderland (or how to extract millions from auditors)

Does it not often happen that liquidators sue people who have participated in company wrongdoing, as where corporate assets are misdirected to third parties with the whole-hearted consent of the naughty shareholders, but to the dismay of the creditors? It seems to me that what we mean by 'the company' changes once the insolvency regime kicks in, and that the court might rightly feel reluctant to deny claims by 'the company really meaning the creditors' on the ground that 'the company really meaning the shareholders' has done something bad. I agree with what Andrew says about the decision subverting Caparo, though.

C

At 11:36 19/11/2007 +0000, Robert Stevens wrote:

Well, it was only a strike out ...

That said, the claim should have failed on the basis that ex turpi causa non oritur actio. As far as I can see, SR needed to rely upon their own wrongdoing in order to make out their claim and that should have been the end of the matter. Having read it through twice I don't understand why the judge thinks differently.

(The case is here.)

The reasoning is, I think, to be found in paragraph 65 (10) where the judge seems to lapse into the 'repugnant to the conscience of the ordinary citizen' test, which I had thought did not represent the law according to the House of Lords.

Of course, even if the claim succeeded the recoveries would not just be 'handed over' to the bank. The bank would be an unsecured creditor and would have to prove along with all the other mugs. So, I am not as impressed by the argument that Caparo is being circumvented.

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