Although Jeff Kennett, the premier of Victoria, claimed the settlement was 'by far the largest reported payment in an audit negligence claim in Australian legal history', a spokesman for KPMG said it was not sufficiently large to have international ramifications. The bill would be picked up by the Australian firm's insurers.
Nevertheless, it will be seen as a fresh blow to the accountancy profession, which is increasingly being hit by large claims. By far the biggest is the estimated dollars 8bn suit being brought by Touche Ross, the Bank of Credit and Commerce International liquidator, against its former auditors Price Waterhouse and Ernst & Young.
Others include the Government's suit against Touche over Barlow Clowes and claims against Arthur Andersen over the failure of the DeLorean car company.
In 1991 KPMG agreed to pay Ferranti pounds 40m to settle the electronics group's lawsuit over the discovery of a pounds 215m fraud at its International Signals subsidiary. Last year two former directors of Medway Ports began a case against the firm for negligence in a share valuation which they claim deprived them of a multi-million-pound windfall.
The Tricontinental case stemmed from KPMG's audit of the accounts of the bank, which collapsed in 1990 with a shareholders' funds deficit of Adollars 2.6bn.
At the time the bank was owned by the state government, but it was sold to the Commonwealth Bank of Australia after the collapse.
Mr Kennett said the settlement - which does not involve any admission of liability by KPMG - was made in the best interests of the taxpayer because of 'the prospect of protracted and expensive litigation which could have extended for many years'.
KPMG's executive chairman, John Harkness, agreed that the deal was the only practical solution to a very difficult situation. 'The sheer enormity of this case made the prospect of pursuing justice through the usual legal channels totally impractical,' he said.Reuse content