Supreme Court holds fraudulent conduct of directors cannot be attributed to company

Posted on: April 28th, 2015

Many frauds are carried out using corporate vehicles, which ultimately transpire to be little more than empty shells. Victims of the fraud and other creditors will often want to look to those who have breached their duties to the company in allowing the fraud to be perpetrated.

Such claims have been brought though liquidators or administrators, but in a leading case, the House of Lords in (Moore Stephens v Stone Rolls Limited [2009] UKHL 39) determined that a “one man company” was fixed with the knowledge of the fraudulent director, so the company was found to have also acted fraudulently and was barred from bringing a claim against auditors by public policy preventing a claimant relying on its own illegal conduct.

In Jetivia SA and another (Appellants) v Bilta (UK) Limited and others (Respondents) [2015] UKSC 23, the Supreme Court unanimously held that where there was a claim by the company and its liquidators for breach of a director’s duty, it would be unjust and absurd to attribute the wrongdoing of the director to the company he or she had damaged.
This decision is to be welcomed in assisting victims of fraud to obtain redress against those ultimately responsible.