Date
05/03/2010
The Issues
Gray v Thames Trains Ltd - whether Claimant could recover damages following conviction and sentence for strict liability offence.
The Facts
The Defendant was a firm of Chartered Accountants. The Claimant was an Investment Manager. He alleged that the Defendant firm had advised him negligently in relation to the winding up of capitals for the Saxon Drinks Ltd, a company of which he was a sole Director. His main allegation was that the firm should have advised him that his conduct in becoming a Director of a company using a trade name of a liquidated company without giving notice to creditors or obtaining leave of the Court amounted to a criminal offence under Section 216 of the Insolvency Act 1986. On the 30th July 2007 he was convicted in the Richmond Magistrates Court of contravening the Section and was fined £1,000.00. He subsequently appealed to the Divisional Court and his appeal was dismissed. The offence was one of strict liability.
In the proceedings against the firm he claimed that he had suffered loss, including the loss of a 27.3% shareholding in an SEC-registered investment advisory company which he could not retain due to SEC disclosure rules and in addition, loss of earnings and the cost of the criminal proceedings. The claim was denied by the firm on the basis that it did not owe a duty of care and that it was not negligent but in addition that the Claimant's claim was barred on the grounds of "ex turpi causa non oritur actio", in other words, that an action could not arise from a base or disgraceful cause. The firm applied to strike the claim out.
The Decision
Two issues arose for consideration. The first issue was the scope of the narrow rule of public policy as described by Lord Hoffman in Gray v Thames Trains Ltd. The question was whether the narrow rule was that a Claimant could not recover for damage which flowed from a sentence lawfully imposed in consequence of his own unlawful act, or whether the rule also encompassed any losses flowing from the conviction for that unlawful act. In this case some at least of the losses claimed by the Claimant arguable flowed from the conviction under Section 216 but not from the £1,000.00 fine imposed. The second issue concerned the level of the Claimant's culpability or negligence that was required to be proved where an ex turpi causa Defence was raised, on the basis of an offence of strict liability.
As to the first issue, the rationale of the narrow rule in Gray was that it was inconsistent for the Civil Courts to compensate a Claimant for a penalty adjudged to have been imposed for his personal fault. The conviction itself, particularly of an offence of strict liability, might not carry any personal fault. It was clear from the decision in Gray that the narrow rule applied only to losses flowing from the sentence imposed. The consequence of this was that the most significant losses claimed by the Claimant did not fall within the narrow formulation of the rule.
The second issue had not arisen directly in Gray v Thames Trains Ltd because it was a manslaughter case where it was essential to prove "mens rea" or a guilty mind. The existing cases were not all consistent. It might be that the level of culpability would depend on the offence relied upon. There was a wide spectrum of offences of strict liability and it was not clear that there could or should necessarily be a "one size fits all" determination.
The use of the words "gross"; "culpable"; or "crass" to describe negligence were unhelpful. Negligence was a well understood concept but negligence characterised by one of these words was not. The question of the level of culpability required to support an ex turpi causa Defence, based on a strict liability Defence, was intimately bound up with the issue of causation.
There had to be a Trial of the claim. This was an area of developing law and the Defendant had failed to show that the Claimant had no real prospect of succeeding.
Application for Summary Judgment dismissed.