Tuesday, June 22, 2010

Court of Appeal on the 'True and Fair view'

In an earlier post, Shantanu had discussed the judgment of the England & Wales High Court in Macquarie  Internationale Investments Ltd. v. Glencore UK Ltd. The decision of the High Court has been upheld on appeal by the Court of Appeal in a judgment available here. The Court of Appeal observes (paragraphs 51, 52 and 54) in relation to the ‘true and fair view’:

On this issue a joint opinion written by Mr Leonard Hoffmann QC and Ms Mary Arden in September 1983 has been highly influential… The essential thesis of Mr Hoffmann and Ms Arden was that the concept of “true and fair view” as used in the Companies Acts is an abstraction. It is for the courts to decide in any given case whether the accounts do give a true and fair view. However, in deciding this question the courts look for guidance to the ordinary practices of accountants and in particular to the standards published by the relevant professional body. These published standards not only guide accountants in the preparation of accounts but also mould the expectations of those who read or use the accounts. Therefore compliance with professional standards is prima facie evidence that the accounts present a true and fair view of the assets and liabilities of the company or the group. Deviation from accepted accounting principles is prima facie evidence that the accounts do not present a true and fair view of the assets and liabilities of the company or the group Mr Glick drew our attention to the decision of the House of Lords in Smith New Court Securities Ltd v Citibank N.A., [1997] AC 254, in particular the speech of Lord Steyn at page 271, in support of the proposition that accounts properly prepared may subsequently turn out not to have presented a true and fair view. However, I do not think that this authority supports that proposition…

The Corporate Law and Governance blog notes that the 1983 joint opinion referred to in the above passage is available at this link (along with an opinion in 2008 prepared by Martin Moore QC).

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