Moore Stephens v Stone Rolls Ltd (in liq)

Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39 is a leading case relevant for UK company law and the law on fraud and ex turpi causa non oritur actio. The House of Lords decided by a majority of three to two that where the director and sole shareholder of a closely held private company deceived the auditors with fraud carried out on all creditors, subsequently the creditors of the insolvent company would be barred from suing the auditors for negligence from the shoes of the company. The Lords reasoned that where the company was only identifiable with one person, the fraud of that person would be attributable to the company, and the "company" (or the creditors standing in its insolvent shoes) could not rely on its own illegal fraud when bringing a claim for negligence against any auditors. It was the last case to be argued before the House of Lords.

The decision was subject to much criticism, and was reviewed by the Supreme Court in Jetivia SA v Bilta (UK) Limited (in liquidation).

Facts

Stone & Rolls Ltd was wholly owned and directed by Mr Stojevic. Moore Stephens was the firm of chartered accountants hired to perform audits between 1996 and 1998. Mr Stojevic deceitfully siphoned assets of the company away and falsified accounts to show more profitable transactions than were real. In previous litigation, one of the main victims (a Czech bank, Komerční banka) had successfully sued both the company and Mr Stojevic. The company went into liquidation.