Law report: Accountants could act against former client
22 October 1998 His Royal Highness Prince Jefri Bolkiah v KPMG (a firm) Court of Appeal (Lord Woolf, Master of the Rolls, Lord Justice Otton and Lord Justice Waller) 19 October 1998
Thursday 22 October 1998
The Court of Appeal, by a majority, allowed the appeal of KPMG against the grant of an injunction preventing them from carrying out an investigation for the Brunei Investment Agency ("BIA").
KPMG were the auditors of the core assets of BIA for many years. In July 1996 they were instructed by Prince Jefri Bolkiah of Brunei, who was then chairman of BIA, to investigate his financial affairs in connection with litigation between him and the Manoukian brothers. That litigation settled in March 1998, but KPMG personnel continued to act for Prince Jefri for some time thereafter.
At about the time of the settlement of the litigation a disagreement between Prince Jefri and his brother, the Sultan of Brunei, resulted in enquiries being carried out in Brunei as to whether he had used assets of BIA for his own benefit. BIA wanted KPMG to be involved in the investigation as to the whereabouts of such assets. KPMG decided that they were able to construct information barriers to protect confidential information which they held on behalf of Prince Jefri, and so accepted the instructions.
Once Prince Jefri learned of KPMG's involvement in the investigations he commenced proceedings against them and, on 15 September 1998, obtained an injunction restraining them. KPMG appealed.
David Donaldson QC, Ali Malek QC and David Quest (Stephenson Harwood) for KPMG; Gordon Pollock QC, Richard Meade and James Collins (Lovell White Durrant) for Prince Jefri.
Lord Woolf MR said that the proper approach in a case such as the present involved the following questions: whether there was confidential information which if disclosed was likely adversely to affect the former client's interests; whether there was a real or appreciable risk that the confidential information would be disclosed; and whether the nature and importance of the former fiduciary relationship meant that the confidential information should be protected by the court exercising its discretion and intervening.
Those questions were to be answered on the evidence in a particular case, balancing the different interests involved and remembering that the questions would inevitably overlap. In so doing the court should not confuse professional and ethical duties with legal duties.
Whilst the position in relation to accountants was broadly similar to that of solicitors, and was capable of falling within the pragmatic approach adopted by the majority of the Court of Appeal of New Zealand in Russell etc v Tower Corporation (unreported, 27 September 1998) even as to forensic work the position was not necessarily the same.
Solicitors occupied a more central role in litigation, and the relationship between accountants and their clients sometimes made it inconvenient or impractical for the client to change accountants.
In the present case, BIA had expressly released KPMG from any duty to disclose confidential information received from Prince Jefri, and KPMG had additionally made a formal undertaking not to disclose information about his financial affairs obtained in the course acting for him in the litigation involving the Manoukian brothers.
In those circumstances their duty should be limited to making reasonable efforts to protect the confidential information which they had received from Prince Jefri, and that they had done. Prince Jefri should have anticipated that in the event of a conflict BIA would want to retain KPMG and, accordingly, unless he would otherwise actually suffer serious damage, it was not reasonable for him to require KPMG to be dismissed.
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