Barings plc and another v Coopers & Lybrand and others
| Date | 01 February 1997 |
| Published date | 01 February 1997 |
| Pages | 165-168 |
| DOI | https://doi.org/10.1108/eb024923 |
| Author | Leggatt LJ,Swinton Thomas LJ,Mummery LJ,Joanna Gray |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 5 Number 2
Barings' Singapore auditors may owe duty
of care
Barings plc and another v Coopers &
Lybrand and others
(Court of Appeal: Civil Division) Leggatt LJ, Swinton Thomas LJ and
Mummery LJ
Date of Judgment: 22nd November, 1996
Reported at: Times Law Reports, 6th December, 1996
FACTS
Bishopscourt (BS) Ltd (formerly known as
Barings Securities Ltd, BSL) was an indir-
ect subsidiary of Barings plc (the English
holding company of the Barings group).
BSL and its subsidiaries carried out agency
and own account futures and securities
trading. Barings Futures Singapore Pte Ltd
(BFS),
a Singapore incorporated company
which traded on the Singapore Interna-
tional Monetary Exchange (SIMEX), was
in turn an indirect subsidiary of BSL, and,
therefore, of Barings plc too.
The General Manager of BFS from 1993
until February 1995 was Mr Nick Leeson.
Mr Leeson had been given the authority to
conduct a certain amount of proprietary
arbitrage trading to exploit any price
dif-
ferences that might arise between matching
contracts traded on both SIMEX and the
Japanese exchanges. In fact, Mr Leeson
went much further than this limited
authority and from 1992 until the time of
his resignation just before the collapse of
the Barings group, he conducted
unauthorised futures and options trading
through the medium of a fictitious account
'8888'
which he opened ostensibly as an
error account but, in fact, used as an active
trading account and concealed the extent
of his losses arising from this trading.
These losses stood at £848.5m at the time
of the Barings group collapse in February
1995.
Mr Leeson funded his unauthorised
trading activities through false requests for
additional margin to BSL, who in turn
secured the funding from Barings Group
Treasury. By the time the group collapsed
BSL had provided additional funding to
finance Mr Leeson's unauthorised trades of
at least £405m — far in excess of the total
value of Barings' shareholders' funds which
at that time amounted to £308m.
During the relevant period Coopers &
Lybrand had prepared the consolidated
group accounts for Barings and Coopers &
Lybrand Singapore (C&L Singapore)
audited BFS's consolidation schedules for
the purposes of the preparation of the Bar-
ings group accounts. At no point during
these audits did the auditors detect or
report on Mr Leeson's unauthorised trad-
ing or the losses which it caused, in fact
accounts were prepared which showed
BFS to be extremely profitable.
The instructions given by Barings to
C&L Singapore for the preparation of the
group audits required C&L Singapore to
report whether they were aware of any
significant internal control or accounting
Journal of Financial Regulation
and Compliance. Vol. 5, No. 2,
1997.
pp. 165-168
© Henry Stewart Publications.
1358-1988
Page 165
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