Date: Tue, 20 Nov 2007 13:13

From: David Cheifetz

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

Perhaps I'm being overly simplistic (something I'm rarely accused of) but ...

Leaving aside ex turpi, shouldn't this be seen as a straight-forward, (ahem) common-sense, causation issue? Isn't the better conclusion that by no reasonable stretch can it be said that the auditor's negligence, even if they owed a duty, even if they were negligent, made a difference? The better conclusion is that SR would have done the scam no matter what, so that on a proper analysis the auditor's conduct isn't even a NESS-analysis contributory factor; heck, not even a Canadian Athey de minimis. Or, if one wishes to say there's at least some basis for assigning historical causation, then fall back on ex turpi and say it's not a legal factual cause.

For comparison, see, B.S.A. Investors Ltd. v. DSB, 2007 BCCA 94.

I understand leave to appeal is being sought in BSA.

Cheers,
David

-----Original Message-----
From: Robert Stevens
Sent: November 19, 2007 6:36 AM
To: Andrew Tettenborn
Subject: Re: Alice in Wonderland (or how to extract millions from auditors)

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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