Bolkiah (Prince Jefri) v KPMG (A Firm)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD BROWNE-WILKINSON,LORD HOPE OF CRAIGHEAD,LORD CLYDE,LORD HUTTON,LORD MILLETT
Judgment Date18 Dec 1999
Judgment citation (vLex)[1998] UKHL J1218-1

[1998] UKHL J1218-1

HOUSE OF LORDS

Lord Browne-Wilkinson

Lord Hope of Craighead

Lord Clyde

Lord Hutton

Lord Millett

Prince Jefri Bolkiah
(Appellant)
and
Kpmg
(A Firm) (Respondents)
LORD BROWNE-WILKINSON

My Lords,

1

Shortly after the conclusion of the argument in this case we gave judgment allowing the appeal and granting an injunction, saying that we would give our reasons at a later date. I have had the advantage of reading in draft the speech to be given by my noble and learned friend, Lord Millett. It fully sets out the reasons which led me to allow the appeal and grant the injunction.

LORD HOPE OF CRAIGHEAD

My Lords,

2

I have had the advantage of reading in draft the speech which has been prepared by my noble and learned friend, Lord Millett. For the reasons which he has given, with which I agree, I also was in favour of allowing the appeal and granting the injunction.

3

I consider that the nature of the work which a firm of accountants undertakes in the provision of litigation support services requires the court to exercise the same jurisdiction to intervene on behalf of a former client of the firm as it exercises in the case of a solicitor. The basis of that jurisdiction is to be found in the principles which apply to all forms of employment where the relationship between the client and the person with whom he does business is a confidential one. A solicitor is under a duty not to communicate to others any information in his possession which is confidential to the former client. But the duty extends well beyond that of refraining from deliberate disclosure. It is the solicitor's duty to ensure that the former client is not put at risk that confidential information which the solicitor has obtained from that relationship may be used against him in any circumstances.

4

Particular care is needed if the solicitor agrees to act for a new client who has, or who may have, an interest which is in conflict with that of the former client. In that situation the former client is entitled to the protection of the court if he can show that his solicitor was in receipt of confidential information which is relevant to a matter for which the solicitor is acting, against the former client's interest, for a new client. He is entitled to insist that measures be taken by the solicitor which will ensure that he is not exposed to the risk of careless, inadvertent or negligent disclosure of the information to the new client by the solicitor, his partners in the firm, its employees or anyone else for whose acts the solicitor is responsible.

5

As for the circumstances in which the court will intervene by granting an injunction, it will not intervene if it is satisfied that there is no risk of disclosure. But if it is not so satisfied, it should bear in mind that the choice as to whether to accept instructions from the new client rests with the solicitor and that disclosure may result in substantial damage to the former client for which he may find it impossible to obtain adequate redress from the solicitor. It may be very difficult, after the event, to prove how and when the information got out, by whom and to whom it was communicated and with what consequences. In that situation everything is likely to depend on the measures which are in place to ensure that there is no risk that the information will be disclosed. If the court is not satisfied that the measures will protect the former client against the risk, the proper course will be for it to grant an injunction.

6

As my noble and learned friend has shown in his careful analysis of the facts in this case, K.P.M.G. have been unable to demonstrate that they can provide the protection to which Prince Jefri is entitled in order to ensure that there is no risk that confidential information which they have acquired from him will be disclosed to those engaged on Project Gemma. The terms of the injunction are designed to protect him against that risk, while enabling K.P.M.G. to continue to provide services to B.I.A. as its auditors.

LORD CLYDE

My Lords,

7

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Millett. The reasons which he fully sets out are those which led me to allow the appeal and grant the injunction.

LORD HUTTON

My Lords,

8

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Millett. The reasons which he fully sets out are those which led me to allow the appeal and grant the injunction.

LORD MILLETT

My Lords,

9

The question in this appeal is whether, and if so in what circumstances, a firm of accountants which has provided litigation support services to a former client and in consequence has in its possession information which is confidential to him can undertake work for another client with an adverse interest. The question has become of increased importance with the emergence of huge international firms with enormous resources that operate on a global scale and offer a comprehensive range of services to clients.

10

Some time after the conclusion of the argument your Lordships gave their unanimous opinion that the appeal should be allowed and stated that they would give their reasons later. I now give my reasons for allowing the appeal.

11

The facts

12

Your Lordships have been supplied with an agreed Statement of Facts. It is the principal though not the only source from which the following summary is derived.

13

The respondents ("K.P.M.G.") are a large and well-known English firm of chartered accountants with associated but separate firms around the world. Their London office employs almost 5,000 staff and has at least 350 partners working from different offices. The staff of the forensic accounting department alone numbers more than 100. K.P.M.G. are the auditors to between 20 and 25 per cent. of all listed companies in the United Kingdom. They are one of the five largest firms of accountants not merely in this country but in the world.

14

Ever since the Brunei Investment Agency ("the B.I.A.") was established in 1983 K.P.M.G. have undertaken the annual audit of its core funds. The B.I.A. was formed to hold and manage the General Reserve Fund of the Government of Brunei and its external assets and to provide the Government with money management services. The exact size of its core funds is secret but they are valued in many billions of dollars. In the last three years, K.P.M.G. have undertaken over 6,000 hours per year of chargeable time on the audit. The engagement partner responsible for the audit work was Mr. Peter Harrison. The affairs of the B.I.A. are secret and under its governing Act unauthorised disclosure is a criminal offence. The B.I.A. did not authorise the disclosure in these proceedings of the details of K.P.M.G.'s relationship with it until after the hearing at first instance, and this has caused K.P.M.G. difficulties in the presentation of their case which have led to adverse criticism of their apparent lack of candour. In addition to their audit work, K.P.M.G. also carried out associated advisory and consultancy work for the B.I.A. On average, about 4,000 hours a year of chargeable time is spent on this work. A long and close working relationship between the B.I.A. and K.P.M.G. has resulted.

15

The appellant ("Prince Jefri") is the third and youngest brother of the Sultan of Brunei. Until March 1998 he enjoyed a very close relationship with the Sultan. He is a former Minister of Finance and was for many years the Chairman of the B.I.A. He is, however, no longer in favour. He has recently been removed from his position as Chairman of the B.I.A., and partners of Arthur Andersen have taken control of his companies as Executive Managers under powers conferred by emergency decrees.

16

Over the years numerous large transfers of capital ("the special transfers") were made out of the core funds. The destination and use of these transfers did not form part of K.P.M.G.'s audit. K.P.M.G. were required to accept an annual representation from the Board of the B.I.A. (of which Prince Jefri was Chairman) that the transfers were made on behalf of or for the benefit of the Brunei Government and accordingly carried out no further investigation of them.

17

Over a period of 18 months between 1996 and 1998 K.P.M.G. were also retained by one of Prince Jefri's companies on his behalf and at his request to undertake a substantial investigation in connection with major litigation (the "Manoukian litigation") in which he was personally involved. The investigation, which was given the code name Project Lucy, was mainly conducted by K.P.M.G.'s London forensic accounting department, though their taxation department was also involved. The engagement partner on Project Lucy was Mr. Adam Bates.

18

Project Lucy involved the forensic accounting department in the provision of extensive litigation support services in the course of which they performed tasks usually undertaken by solicitors. They investigated the facts, interviewed witnesses with or without solicitors being present, searched for documents, took part in conferences, including telephone conferences, with counsel and in the absence of solicitors, drafted subpoenas, reviewed draft pleadings and prepared ideas for cross-examination. They took instructions and obtained information directly from Prince Jefri's own staff without the intervention of solicitors.

19

In the course of Project Lucy, as well as a number of other personal assignments which they undertook for Prince Jefri, K.P.M.G. were entrusted with or acquired extensive confidential information concerning Prince Jefri's assets and financial affairs. In particular they became privy to a substantial volume of information concerning the identity of his assets, their location, the legal structure of their ownership, the identity...

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