(CNS): Claims brought against Arthur Andersen LLP concerning Trade and Commerce Bank have been struck out in the Grand Court of the Cayman Islands. Local law firm Ogier, representing the beleaguered accounting firm which acted as the bank’s auditors between 1988 and 2000, has succeeded in striking out the claims made against it. The claims, for over $800m, alleged that Arthur Andersen had negligently failed to detect the allegedly dishonest behaviour of the bank and the massive fraud perpetrated against South American depositors. (Chris Russell of Ogier pictured left)
The court decisively struck out the claims at a preliminary stage of the action, on the basis that the alleged fraud, if it had occurred, had been perpetrated by the controlling mind of the bank, and, following a recent decision of the English Court of Appeal, the bank could not be permitted to benefit from illegal conduct of which it was itself the perpetrator.
Chris Russell, head of litigation at Ogier who acted on behalf of Arthur Andersen, said it was an important decision. “If the claims had been allowed to proceed, it would have paved the way for other companies to sue their auditors if they failed to spot and report a fraud committed by the company itself. It may seem unfair to creditors and shareholders but the logic is unassailable; put shortly, you can not have the right to sue an auditor for failing to inform you that you are yourself committing a fraud.”
Russell recently acted on behalf of Carson K Ebanks JP in the judicial review into the lawfulness of applications for warrants issued by Ebanks and applied for by the Special Police Investigation Team (SPIT), headed by Martin Bridger to search Justice Alexander Henderson’s home and office. Sir Peter Cresswell, in a decision highly critical of members of SPIT, made no finding of fault or criticism of Ebanks, who he suggested had been a victim of the circumstances.
