Re Barings plc (No 5)

Re Barings plc (No 5)
Court High Court
Full case name Secretary of State for Trade and Industry v Baker (No.5)
Citation(s) [2000] 1 BCLC 523
Case history
Prior action(s) [1999] 1 BCLC 433
Court membership
Judge(s) sitting Jonathan Parker J; Morritt LJ, Waller LJ and Mummery LJ
Keywords
Care and skill, Directors' duties

Re Barings plc (No 5) [2000] 1 BCLC 523 is a leading UK company law case, concerning directors' duties of care and skill. Some reporters and commentators call this case "No 5"[1] while others refer to it as "No 6" in the saga of litigation concerning Barings Bank.

Facts

Nick Leeson was a dishonest futures trader in Singapore for the former Barings Bank. He traded in the front office and also did work, in breach of an internal audit recommendation, in the back office. He fraudulently doctored the bank's accounts, and reported large profits, while trading at losses. After an earthquake in Kobe, Japan, the stock market went into a downward spiral, and the truth of his losses were uncovered. The Secretary of State sought director disqualification orders under the Company Directors Disqualification Act 1986 against three directors of Barings for their failure to supervise his activities. They were alleged to be incompetent, and therefore "unfit to be concerned in the management of a company" (sections 6-8).

Judgment

High Court

Jonathan Parker J held that the three directors should be disqualified. Unfitness was determined by the objective standard that should ordinarily be expected of people fit to be directors of companies. Directors must inform themselves of company affairs and join in with other directors to supervise those affairs. Having no adequate system of monitoring was therefore a breach of this standard. Directors may delegate functions, but they nevertheless remain responsible for those functions being carried. Furthermore, the degree of a director's remuneration will be a relevant factor in determining the degree of responsibility with which a director must reckon.[2]

Court of Appeal

Morritt LJ, Waller LJ and Mummery LJ upheld Jonathan Parker J's decision in full. Morritt LJ delivered judgment for the whole court.

See also

Notes

  1. L Sealy and S Worthington, Company Law (OUP 2007)
  2. [1999] 1 BCLC 433

References