Wine Enterprise Investment Scheme Ltd (in liquidation) v Crowe U.K. LLP [2026] EWHC 692 (Ch) and the follow-on costs ruling [2026] EWHC 1662 (Ch) is a significant case not just because of the outcome, but because of how the claim was structured and why that structure mattered.

Previously, where fraud is attributable to the company, claims brought by the company would often founder based on the “clean hands” principle and the absence of duties owed to individual shareholders. Here, although the liquidators managed to bypass those barriers at the duty and breach stages, the claim still ultimately failed on causation grounds, leading to a huge void between the recovered damages and the costs awarded to the auditors and incurred by the liquidator.

The problem the claimant had to solve

Two well-established principles stood in the way of a straightforward auditor negligence claim.

First, under Caparo Industries plc v Dickman [1990] UKHL 2, auditors do not owe a duty of care to individual shareholders making personal investment decisions. A claim brought by investors for their own losses would have failed at the duty stage.

Second, under Moore Stephens v Stone & Rolls [2009] UKHL 39, where the fraudster is the sole directing mind and beneficial owner of the company, as Zvonko Stojevic was in Stone & Rolls, the fraud is attributed to the company in its entirety, and the company cannot then sue its auditors for the fraudulent losses. An attribution argument, if accepted, would have resulted in the claim failing too. 

The claimant’s solution

The liquidators' answer to both problems was to bring the claim on behalf of the innocent shareholders collectively, not as individual investors seeking to recover personal losses, but as the shareholder body exercising the governance function that the audit is designed to protect.

The classical justification for the audit in Caparo itself is not to underwrite individual investment decisions, but to equip shareholders as a group with reliable information to scrutinise and control management. 

That framing gave the claimants two advantages. First, it kept the claim within the recognised scope of auditor duty by avoiding the absence of duties to individual shareholders or individual reliance. Second, it allowed the directors' fraud to be treated as a question of causation and contributory negligence, rather than as an attribution argument that would have barred the claim entirely under Stone & Rolls. The shareholders were innocent, as the fraud was not theirs.

The closer parallel is in the Barings proceedings against Deloitte: there the fraudster Nick Leeson was not "the company", and although in that case the degree of management fault was high, his frauds were not attributed to the company, leading to the claim being determined based on causation, contribution and scope of duty, rather than extinguished at the outset. Wine Enterprise reached the same stage, and for similar reasons. In Barings the fraud was not attributed to the company so as to bar the claim; in Wine Enterprise it was the shareholders who were innocent.

Why the claim fell short on causation 

Having overcome the issues on attribution and duty, it remained essential for the claimant to establish causation – i.e. that the loss would have been prevented but for the breach of duty. The "members as a body" route depends entirely on what those shareholders would actually have done had the auditors refused to sign off or resigned. The consequentials judgment returns repeatedly to the absence of that evidence: how would the shareholders have received the relevant information, and would they have intervened in time to prevent the losses alleged?

Without convincing answers, the causal chain collapsed. The court reduced the claimant’s award by 50% for contributory negligence resulting in damages of £101,965.95 (plus interest). The court also declined to recognise any common law duty on auditors to report suspected fraud directly to individual shareholders, closing off one possible route through the causation difficulty.

The costs 

The claim was pleaded at between £3.35m and £8.42m. Crowe's Part 36 offer stood at £3.175m. The recovery was £101,965.95, which with interest was around 1.6% of the upper figure. The court ordered the claimant to pay 85% of Crowe's costs from the expiry of the Part 36 offer. Given that the damages were so far exceeded by both the claimant’s own costs and the costs awarded to Crowe, the judge rightly described the claim as a "Pyrrhic victory". Not surprisingly, in these circumstances, the Liquidator has sought to appeal, with the trial judge denying permission.

Conclusion

Audit firms, other professionals and their insurers will need to be aware that even fraudulent companies such as this can get around the clean hands principle and sidestep the lack of direct duties to individual shareholders by pleading claims in this way. But this does not solve the causation problem, and, as the costs judgment shows, a technically valid claim that recovers a fraction of its pleaded value is not a win. Attention to causation evidence and Part 36 strategy matter as much as legal analysis on the duty and breach stages.

The judgment will reward careful reading by audit firms, professional indemnity insurers and insolvency practitioners: it demonstrates that structural ingenuity in claim design does not guarantee recovery, and that the causation question deserves as much attention at the outset as any question of duty or breach. If you are a professional services firm or insurer seeking to understand how this decision affects your risk exposure or claims handling approach, please get in touch with our specialist professional indemnity team.