His Royal Highness Prince Jefri Bolkiah v KPMG (A Firm)
| Jurisdiction | England & Wales |
| Judge | LORD WOOLF, MR,LORD JUSTICE OTTON,LORD JUSTICE WALLER |
| Judgment Date | 19 October 1998 |
| Neutral Citation | [1998] EWCA Civ 1563 |
| Docket Number | FC2 98/7079/3: FCW 98/7083/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 October 1998 |
[1998] EWCA Civ J1019-16
The Master Of The Rolls
Lord Woolf
Lord Justice Otton
Lord Justice Waller
FC2 98/7079/3: FCW 98/7083/3
CHAN1 98/1196/3
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE CHANCERY DIVISION (MR JUSTICE PUMFREY)
Royal Courts of Justice
Strand
London WC2
MR D DONALDSON QC, MR A MALEK QC and MR D QUEST (Instructed by Messrs Stephenson Harwood, London, EC4A 8SH) appeared on behalf of the Appellant
MR A POLLOCK QC, MR R MEADE and MR J COLLINS (Instructed by Messrs Lovell White Durrant London, WC2A 21L) appeared on behalf of the Respondent
Monday 19 October 1998
INTRODUCTION
This appeal raises an issue of considerable importance. It is as to when it is permissible for a firm of accountants, such as KPMG, to conduct an investigation on behalf of a client against a former client for whom they have previously acted when they still possess information of a confidential nature relating to the former client which is relevant to the investigation.
By Order dated 15 September 1998 Pumfrey J granted an injunction restraining the defendant (KPMG) "whether acting by its partners, officers, servants or agents or any of them, from doing the following acts or any of them, that is to say (a) continuing to carry out the investigation known as Project Gemma, or (b) carrying out any work covering any of the same subject matter as Project Gemma for the Brunei Investment Agency (BIA), or any other agency of the Government of Brunei, or any member of the Royal Family of Brunei, … (or certain companies) … or any person purporting to be their executive managers". Leave to appeal was granted by the judge and this appeal has been heard as a matter of urgency. The reason for that urgency can broadly be stated as follows. KPMG were the auditors of the core assets of BIA for many years. They were instructed by the plaintiff (Prince Jefri) in July 1996 to investigate his financial affairs in connection with litigation between him and the Manoukian brothers. At that time there did not appear to be any conflict between BIA and Prince Jefri. The litigation settled in March 1998, but personnel in KPMG have continued acting for Prince Jefri for some period thereafter. At about the time of the settlement of the litigation Prince Jefri and his brother the Sultan of Brunei fell out. That falling out has resulted in enquiries being carried out in Brunei as to whether Prince Jefri has used assets of BIA for his own benefit. BIA has been desirous of KPMG being involved in the investigation as to the whereabouts of assets suggested to have been utilised by Prince Jefri for his own benefit. KPMG were first contacted for that purpose in June 1998 (albeit before the judge the date was put somewhat later). KPMG took the decision that they were able to construct information barriers to protect confidential information which they accepted that they held on behalf of Prince Jefri. That being so they accepted the instructions to carry out investigations and did so without informing Prince Jefri. Once Prince Jefri learned of the investigations being carried out by KPMG he commenced these proceedings. He issued a Writ and Notice of Motion both dated 24 August 1998 supported by affidavits. It is a matter of some importance to Prince Jefri as to whether KPMG are entitled to act in the investigations on which they are now instructed by BIA, and it is equally important for BIA to know as a matter of urgency whether they are entitled to continue to use KPMG or whether they must instruct a different firm of accountants.
The facts are set out in more detail in a judgment of Waller LJ which I have read in terms with which I agree.
According to the submissions of the parties there is a total lack of previous authority dealing expressly with what are the duties of accountants in this situation in this or any other common law jurisdiction. However, in the related situation where solicitors are involved there are many cases which have examined the situation in depth. These are especially helpful on this appeal since KPMG had been engaged on forensic work for the Plaintiff and the investigations now being conducted by KPMG on behalf of BIA could lead to litigation. Never the less it cannot be assumed that the duties owed to clients and former clients by solicitors and accountants in relation to forensic work are the same. Equally it can not be assumed that the duties owed by all lawyers are the same. To take as an example, the atypical position of the Treasury Solicitor. The Treasury Solicitor regularly at inquiries and occasionally in litigation (see for example HM. Attorney General v Blake [1998] 1 AER 833 where the Treasury Solicitor acted for the Attorney and in practice Blake by an amicus at the request of the court) represents at the same time parties who have conflicting interests. By the use of Chinese walls, he does so in a way which, as far as I am aware, has never given rise to problems. Yet I would be surprised if a firm of solicitors in private practice would consider it appropriate to appear for and against a client at the same time. Members of the bar are not in partnership, but it is still worth noting that it is common practice for members of the same chambers to appear on opposite sides in the same case without any real risk of the duty of confidence which they owe to their respective clients being breached. I do not myself see why, if in the future partnerships at the bar are permitted, that this would prevent the same position continuing. This, of course, would be impossible. if the existence of the partnership meant that a client was entitled to be informed of any relevant information available to any member of the partnership irrespective of whether the information had been provided to a partner in confidence by an other client. I make reference to this, because there are authorities which suggest that in the case of a solicitor client relationship this is the position. However in Baden Barnes Groves & Co (a firm ) v Bristol West Building Soc (unreported) 22 November 1996 Chadwick J held no duty to disclose information in these circumstances exists. There is nothing to suggest that accountants owe a duty to disclose to a client confidential information received from a different client. The evidence presented to us on this appeal makes clear the difficulties which would arise if this were to be decided to be the legal position. It would totally conflict with the way accountants operate in the real world and would prevent them conducting their practices in the way that happens at the present time. Not surprisingly, Mr Pollock QC does not on behalf of the Plaintiff suggest there is any such duty.
There is no dispute that KPMG 's retainer from the Plaintiff is at an end and, equally unsurprisingly, Mr Pollock accepts in that situation the Plaintiff is not automatically entitled to prevent KPMG acting for BIA. Basing his submission on the decision of the Court of Appeal in Re a Firm of Solicitors [1992] 1 QB he submits:
"(a) that a former client is entitled to prevent a firm of solicitors from acting in an adverse situation if there is any real risk (as opposed to a merely fanciful or theoretical [risk]) of the misuse of confidential information, whether deliberate or inadvertent
(b) that such a risk exists inevitably where relevant confidential information has been provided to a modern practice, and
(c) that the risk cannot be eliminated satisfactorily by the use of Chinese walls"
Mr Pollock contends that in relation to these submissions in the case of forensic work there is no significant distinction between solicitors and accountants.
It is common ground that accountants owe a duty to their former clients to protect any confidential information which they have received from them. KPMG contend that is the limit of their duty but I do not understand Mr Donaldson to dispute that contention (a) of Mr Pollock's submissions can apply to accountants as well as solicitors.
It is on contentions (b) and (c) that Mr Donaldson primarily focuses his criticism both in the case of solicitors and accountants. I am not sure whether Mr Pollock regarded propositions (b) and (c). as being propositions of law or fact or as mixed fact or law but unless compelled to do so by binding authority I would not be prepared to accept that they are correct. I appreciate that a straight forward rule of this sort would, as Mr Pollock argues have the advantage of avoiding satellite litigation, but, however attractive this would be, it does not in my opinion justify creating a factual rule which does not represent what needs to be the position. I do not accept, at least in the case of accountants, that there is inevitably a risk of disclosure. Nor do I accept that Chinese walls are incapable of removing any real risk. To conclude otherwise would mean that clients could be prevented from retaining the accountants of their choice and accountants would be prevented from serving those clients for no good reason. For large multi- national companies and large multi- national accountants the understandable desire for certainty could have seriously damaging consequences.
Mr Donaldson points out that BIA have expressly released KPMG from any duty to disclose confidential information which they have admittedly received from the Plaintiff. So this is not a case where there is any possibility of KPMG being embarrassed by a conflict of duty. In addition as KPMG have made a formal undertaking not to disclose information about the Plaintiff's financial affairs...
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