The escape of the auditors

In Moore Stephens v Stone & Rolls Limited [2008] EWCA Civ 644 the Court of Appeal considered the principle that a claim cannot be founded on an illegal act. The issue was whether the principle provided a defence to a claim brought by a company involved in a fraud, against a third party, in respect of losses suffered as a result of the fraud. Stone & Rolls sued its auditors in professional negligence for failing to detect and report a fraud orchestrated by the company's managing director. Moore Stephens applied to strike out the claim on the grounds that Stone & Rolls relied on its own fraud in bringing the claim.

Stone & Rolls was owned, controlled and managed by its managing director, Mr Stojevic. In a separate action brought by the victim of the fraud, the company and its managing director were found liable for a fraud of USD 94.5m committed by Stojevic using Stone & Rolls