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Fraudulent Trading and Vicarious Liability: Bank of India v. Morris

18 Pages Posted: 26 Nov 2005  

Look Chan Ho

Freshfields Bruckhaus Deringer LLP

Chryssa Papathanassiou

European Central Bank (ECB) - Directorate General Payment Systems and Market Infrastructure

Date Written: November 22, 2005

Abstract

Liquidation proceedings have never been treated in English law as an exclusively private matter between the debtor and its creditors. The society has always been treated as having an important stake in them. Hence it is not surprising to find that the fraudulent trading regime is one of the procedures that exist for the protection of the general public, not in the interests of the creditors or shareholders of the particular company which is in liquidation. Recently the English Court of Appeal found Bank of India (BOI) liable for fraudulent trading under section 213 of the UK Insolvency Act 1986 in relation to BCCI which collapsed in 1991. On one view, the Court of Appeal in effect made BOI vicariously liable for the wrong committed by its employee. Beyond its immediate sphere of application, the Court of Appeal's reasoning has ramifications for other insolvency procedures intended to serve the community's interests as a whole.

The legal regime applicable today to the insolvency of EU credit institutions is very different to that applicable to BCCI. The EU has devised a new regime of universal insolvency proceedings applicable to EU (and EEA) credit institutions including their branches. If BCCI were to collapse today, it could only be subject to Luxembourg winding-up proceedings and Luxembourg law as the lex concursus would determine the effect of the fraudulent transactions considered in this case.

Keywords: Fraudulent trading, vicarious liability, fraud

JEL Classification: K12, K13, K30, K33, K39, K41, K42

Suggested Citation

Ho, Look Chan and Papathanassiou, Chryssa, Fraudulent Trading and Vicarious Liability: Bank of India v. Morris (November 22, 2005). Available at SSRN: https://ssrn.com/abstract=854464 or http://dx.doi.org/10.2139/ssrn.854464

Look Chan Ho (Contact Author)

Freshfields Bruckhaus Deringer LLP ( email )

65 Fleet Street
London EC4Y 1HS
United Kingdom
+44 20 7936 4000 (Phone)
+44 20 7108 2089 (Fax)

Chryssa Papathanassiou

European Central Bank (ECB) - Directorate General Payment Systems and Market Infrastructure ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69-1344-7481 (Phone)

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