Mr Justice Chadwick refused applications by the fourth and fifth defendants, Khoo Kum Wing and S.J. Tan, to set aside the leave granted by Master Barratt, on 23 January 1995, enabling the plaintiffs, Barings plc and Bishopscourt (BS) Ltd, to serve a writ on them outside the jurisdiction.
The first plaintiff was the ultimate holding company of a group which included the second plaintiff, a Cayman Islands company formerly known as Baring Securities Ltd, one of whose subsidiaries was Baring Futures (Singapore) Pte Ltd (BSF). The whole Barings group collapsed in February 1995 following massive losses by BSF, which had been caused by the unauthorised trading activities of Mr Leeson, its general manager.
The first defendants, Cooper & Lybrand, were the external auditors of Barings plc for the financial years ending 31 December 1991 to 1994. The second and third defendants, Chaly Chee Kheong Mah and Po'ad Bin Shaik Abu Bakar Mattar, were partners of Deloitte & Touche, the external auditors of BFS for the financial year ending 30 September 1992 and the subsequent accounting period ending 31 December 1993. The fourth and fifth defendants were partners of Coopers & Lybrand (Singapore), the external auditors of BFS for the financial year ended 31 December 1994.
The plaintiffs claimed damages against the defendants for their failure to identify and report on the lack of internal controls in BSF or on Leeson's unauthorised trading through an account designated 88888, or to discover that a receivable of Yen 7.778bn from Spear, Leeds & Kellog on 2 February 1995, was fictitious.
The fourth and fifth defendants sought to set aside service of the writ against them on the ground that it contained no good arguable claim or that there was no serious issue to be tried against them, and in any case that the English court was not the appropriate forum.
Stanley Burnton QC, Richard Gillis, Graham Halkaston (Slaughter & May) for the plaintiffs; Jonathan Gaisman QC, Christopher Butcher (Wilde Sapte) for the second and third defendants; Richard Field QC, Philip Sales (Herbert Smith) for the fourth and fifth defendants.
Mr Justice Chadwick said he was satisfied to the standard of a "good arguable case" for the purposes of Order 15, rule 4(1) of the Rules of the Supreme Court, that if separate actions were brought against the first defendant and the fourth and fifth defendants, some common questions of law or fact would arise in each and that the relief claimed in both arose out of the same transaction or series of transactions. The claims in both cases arose out of the unauthorised trading of Mr Leeson.
It followed that the fourth and fifth defendants were "proper parties" to the plaintiffs' claim against the first defendants and that the court had jurisdiction under Order 11, rule 1(1)(c) to permit service out of the jurisdiction.
The submission that there was no serious issue to be tried was put on the grounds that the fourth and fifth defendants, as auditors of BFS, owed no relevant duty of care to Barings plc, or if they did, that it was secondary to the duty owed to BFS, and BFS was the proper plaintiff.
It was clear on the evidence that the fourth and fifth defendants knew the information which they were instructed to supply was required by Barings plc so that its directors could comply with the obligation under section 227 of the Companies Act 1985 to prepare consolidated accounts showing a true and fair view of the financial affairs of the group.
It could not therefore be said there was no serious issue of law to be tried as to the existence of a duty of care owed by these defendants to Barings plc.
Finally, his Lordship was satisfied that the English court was the most appropriate forum for the trial of the claims made by Barings plc against the fourth and fifth defendants.
Paul Magrath, BarristerReuse content