The question is not whether the agent's wrongdoing should be attributed to the company, but whether the defendant being sued in the company's name should be entitled to rely on an illegality defence. My point is that the policy considerations which come into play when the court considers the latter question may be different according to the identity of the person who would receive the fruits of the litigation. Many veil-lifting cases suggest that the courts are unenthusiastic about helping out dishonest shareholders, but the outcome may (I do not say will) be different if the litigation boils down to a dispute between 'good' creditors and 'bad' third party conspirators or recipients of misdirected funds.
Quoting Robert Stevens:
The rules for the attribution of wrongdoing of the agent of a company to the company itself do not change according to either the solvency position of a company, or whether it has subsequently gone into an insolvency proceeding. If they did, companies in insolvent liquidation could deny liability for wrongs committed by the company during solvency on the basis that that was done on behalf of the shareholders. Economically the owners of the company are now the creditors, but this does not change the rules of attribution.
In this case, the fact that the individual who was the (primary) wrongdoer was also the main shareholder was not relevant to whether his wrongdoing was attributed to the company. His wrongdoing would have been attributed to SR even if he had no shares at all.
What does change upon a company becoming balance sheet insolvent is the nature of the duties directors owe to the company. The 'true' owners of the company are no longer the shareholders as they will receive nothing if the company goes into winding up. Whose interests the company represents changes, and so the nature of the duty owed by the directors changes. (This point doesn't seem to me to be accurately reflected in the Companies Act 2006 section 170 and following, but as those provisions are not supposed to change anything perhaps it doesn't matter.)
The latter point doesn't seem to me to influence the former. So far as outsiders are concerned, the claimant is the company, this has committed the wrong and this does not alter according to its balance sheet position or whether it goes into insolvency.
Langley J seems to accept that the wrongdoing is attributed to SR, and does not base his judgment upon the company now being in liquidation.
As to the Caparo point, if the target company had suffered a loss as a result of the negligent auditors report prepared for it, prima facie it would have had a perfectly good claim to recover this loss based upon breach of contract. That any recoveries would accrue to the shareholder investors who would not have any free standing claim in their own right would not be an illegitimate circumvention of Caparo. We cannot conclude from the fact that a third party to a right (the investors) cannot claim for loss suffered as a result of its violation, that the rightholder (the company) cannot sue for the loss it suffers because of the rights violation, even if the benefit of recoveries flows to the third party. If I am negligently injured and cannot work, allowing me to claim for my loss does not illegitimately circumvent the rule that my children have no claim in their own right for the loss they suffer as a result of my injuries.
